Lenovo is one of the worlds largest producers of personal computers. The history of the Lenovo Company started in 1984 when a group of scientists of the Chinese Academy of Sciences created New Technology Developer Incorporated, the company specialized on the deliveries of computer equipment to the Chinese market and development of coding for hieroglyphs. In 1986, the name of the company was reduced to the laconic Legend and became the first serious success of the newly established company. It allowed the software in the developed countries to enter the Chinese market of computer technologies.
The event of the end of 2004, namely the conclusion of the agreement with the IBM Company, became the vital turning point in the global promotion of the company. The Chinese company acquired the right to use the trademarks belonging to IBM, the IBM ThinkPad brand in particular, popular in a business environment. According to this agreement, the Lenovo Company bought the IBM Personal Systems Group, namely the division on the production of personal computers for $1,25 billion (the transaction was complete in May, 2005). Under the terms of the transaction, Lenovo could use a brand of IBM until 2010, after which the companys products are issued only under the name Lenovo. Both companies mutually supplement each other and can offer the products of both IBM and Lenovo to clients through distributor channels. Thus, Lenovo received not only missing production capacities but also the brand having the deserved popularity in the American and European markets.
Moreover, Lenovo succeeded in building quite an accurate product line, having effectively divided the products directed at the corporate market and intended for ordinary consumers. The most striking example of this approach includes the emergence of the IdeaPad, the computers for all the family combining the reliability of ThinkPad and the multimedia opportunities demanded by private users. The Lenovo Company is a large and extensive enterprise with the diversified production.
Identification of Core Issues
The main shareholder of the company, namely Legend Holdings Ltd., owns 41,5% of the Lenovo Group stocks. The American investment funds possess 2,8% and 55,1% of the company bargain on the stock exchanges. Lenovo owns 46 laboratories, most of which are located in Beijing (China), Yokohama (Japan), Shanghai, Wuhan, and Shenzhen (China), and in Morrisville (the USA). At present, the company has a stable and long-term policy of development, steady joint-stock structure, and good communicative structure of top managers.
Despite the difficult macroeconomic conditions and ongoing changes taking place in the global PC market, Lenovo was able to achieve impressive results in the recent years. Lenovo is the fastest growing PC manufacturer among the top players. The company achieved success in a record number of indicators, including the market share, net income, and profitability. Furthermore, there is a significant growth in such segments as production and sales of smartphones and tablets.
The position of the companys management concerning the international market was two-fold till 2000s. On the one hand, the entry into the markets out of China was vital for the Lenovo Company. Although the Chinese market was huge, the company was aimed at the global recognition. On the other hand, it had to have a clear action plan to compete with such companies as HP, Dell, and Asus. The change of the companys name was the first step in this development. Moreover, Lenovo became the partner company of the Olympic Games in 2008. As a result, it affected the future development of the company not only financially but also strategically. One of the worlds largest companies on the IT production and huge ambitions on the international market of smartphones, Lenovo rushes a magic image on the markets which, apparently, could not be won. The Chinese persistence and the western qualification compose the formula of success which was devised by Lenovo and became a part of the corporate culture.
External Analysis (Porters Analysis of Lenovo)
The company is under a strong influence of the macro- and microenvironment. The first group which is macro environment includes the environmental elements not controlled by the company, but which have an indirect and consequential impact on its efficiency, namely economic, social, political, legal, scientific, technical, cultural, demographic, natural and international factors and the business environment in the country. The second group of the external factors of the company that is its microenvironment includes the factors not controlled by the company, but which directly affect its functioning. They are represented by the suppliers, customers, competitors,intermediaries, and contact audience such as market institutions, public infrastructure, and others. Both macro- and microenvironments are present in Lenovo.
The economic factors are the most important ones in the company. The scientific and technical factors are also important for the Lenovo Company since it is occupied in the development of high-tech products and the latest technical innovations. Customers are essential for Lenovo because they generate profit, purchasing the IT goods. Moreover, suppliers compose an important factor since the cost of production (raw material) is dependent on them. The unsustainable deliveries inevitably lead to losses. Banks are also important as they are the intermediaries in the investment projects of companies engaged in the accounting and deposit activities of the company. The asset of the American IT giant composes 18,5% of the world market.
The competitors in the IT market compose the biggest threat to the company. The market of IT technologies and PC is very developed and branched at present. There are a lot of companies presenting their products in the market. They produce their goods at a low price, high quality and latest IT solutions. Thus, the potential competitors of Lenovo are the constantly emerging producers in the market of new technologies. They can bring technical innovations and promote the companys products, thereby composing the threat to the company. In the American market, Lenovo takes the fourth place after the largest producers such as HP, Apple and Dell.
The formation of the organizational morale in Lenovo, its contents and separate parameters is influenced by a number of factors of an external and internal environment, but all stages of the development of the organization personal culture in many respects define the culture of the organization. In fact, this influence is felt especially strong at the formation stage of the company. The external environment considerably influences the organization which, naturally, affects its culture. However, two organizations functioning in the same environment can have very different cultures. It occurs because the members of the organization differently solve two very important problems through their joint experience.
The first one includes external adaptation. The process of external adaptation of two merged companies is connected with the search for the niche in the market by the new company and its adaptation to the constantly changing external environment. It is the process of the achievement of purposes and interaction with representatives of external environment by the organization. The second problem includes an internal integration. The process of internal integration is connected with the establishment and maintenance of effective relations at work between the members of the organization that is known as organizational morale. It is the process of finding ways of collaboration and coexistence in the organization. The process of internal integration in Lenovo started from the establishment of the specifics in the definition of the merged companys culture, which is owned by both separate groups and the whole staff of the organization. Thus, the problems of the integral integration presupposing the formation and support of the healthy organizational morale in Lenovo compose the problem of the organizational culture, leading to the formation of the innovative activity of the company.
As for suppliers, Lenovo has reliable suppliers. Therefore, this risk factor is not essential. However, in case of the major changes in the market conditions and change of suppliers, there is the possible improvement of the distribution and marketing channels. The customers of Lenovo compose the segment of people with the average income because Lenovo products are sold in the average price segment. However, due to tough competition in the market and the substitute products, Lenovo struggles for each customer.
Internal Analysis (SWOT-Analysis)
The SWOT-analysis of the company is the analysis of factors, phenomena and their division into four categories, namely strengths, weaknesses, opportunities and threats. The SWOT-analysis of the Lenovo Company is presented in the Figure 1.
A strong brand;
Innovative activity of the company;
A good reputation among clients;
A cheap product cost;
A high level of customer awareness about the company (a company-partner in Olympic Games, participation in forums, and conferences, among others;
Positive image of the company
Average production quality;
Big transport expenditures;
Complexity of forecasting of prices for raw materials (changes are dependent both on the prices in the world market and on the companies monopolists in China)
Introduction into new markets;
Weakening of competitors;
Favorable economic situation both in China and in the global market;
A high demand for the highly-technological production in IT market;
A strong competition in market;
Active advertising campaigns of competitors;
High rates of development of the technological innovations;
Possible strengthening of the international trade barriers
Figure 1. The SWOT-analysis of Lenovo
Thus, the SWOT-analysis showed the possible opportunities for the companys development and promotion in the global market. For rather a short period of time, Lenovo transformed from a small IT company into the world known computer brand. It happened due to the laborious work at all aspects of development, production and sale of production, which implies a continuous study of the market and needs of consumers.
Formulation of Alternatives
There are a lot of alternative approaches to the development of the business strategy of Lenovo. The favorable positioning of the company in relation to its competitors on the basis of its clear advantages and the best quality of service compose the main objective of the marketing strategy. A good marketing strategy is distinguished by the accurately chosen target market, compliance of companys advantages with marketing requirements, and surpassing indicators of the company in the main competitive fields of activity.
The analysis of 3Cs, namely company, clients, competitors, composes the triangle of the marketing strategy of the company. For the development of the alternative marketing plan of Lenovo, it is necessary to consider the developed and desirable relations between the company, its clients and competitors. The main goal is to differ from the companys competitors by the place of competition, identification of the means of competition, and the time of competition.
There are the following decision criteria which define which rules should be chosen and applied for the effective implementation of alternatives of the strategic development of Lenovo. They include the product leadership, operational excellence and customer intimacy. It is evident that all of these parameters are essential for the companys competitive advantage.
Operational excellence should provide the best prices in branch. The main objective of the alternative optimization of business processes is to increase efficiency and to reduce the cost for consumers. The second source of growth is represented by the customer relationship management. The companies aspiring to confidential relations with clients adapt the products to the requirements of the marketing segments. Their competitiveness is grounded on the excellent service and satisfaction of the requirements rather than on lower prices. Thus, regulating the customer intimacy criterion, the companies can get profit at the expense of high prices, but not low expenses.
If the first two criteria have something in common with the patrimonial strategy of the Michael Porters Five Forces, the third one is absolutely innovative one. The companies guided by the strategy of product superiority stake on the regular and fast introduction of novelties. The leaders of branch instantly represent several new products and force competitors to pursue them. The improvement of each of these criteria can compose the base of the companys organizational development. The choice of strategy is defined by the target segment. The choice of a service segment is the equivalent to the choice of strategy, while the strategy choice is equivalent to the selection of the market of service.
In order to improve the position of Lenovo in the world market, the company should take the following measures:
To improve the operational excellence continuously;
To develop the product leadership through advertising campaigns aimed at the promotion of the benefits of competitive products, to name but a few;
To support the customer intimacy.
However, applying these changes in practice, it is also required not to forget about the quality of production. The companys consumers should trust and love to use Lenovo products. The personnel of Lenovo should be professional and qualified in sales. Moreover, Lenovo developers should make every new product better than the previous one. As a variant, the company can merge with bigger companies such as Samsung or Apple. These changes could increase the number of customers and the companys profit. Furthermore, it is necessary to maintain its brand that is a stable position of the company in the market, as well as develop new markets through constant improvement of the production technology, quality and performance, which can provide the company with high competitiveness.
Lenovo made a strategic decision to merge with Motorola Mobility. Owing to the integration of mobile business of Lenovo into the structure of Motorola, the merged company has more potential for the further development and promotion in the global market. The existence of the uniform strategy of development in Lenovo will allow eliminating the internal competition between two merged companied. The mobile division of Lenovo, namely Mobile Business Group, releases smartphones, tablets and smart TVs. Lenovo should restructure its mobile division the main goal of which is to improve and systematize the development and production of gadgets under different marks. The company should combine the strengths of Lenovo and Motorola and decrease the number of Lenovo models and focus on the development and promotion of Lenovo mobile.
Evaluation and Measurement
In order to make the company work effectively and increase the operational excellence of the company, it is necessary, first of all, to fulfill the marketing audit of the company. It will include such criteria as degree of brand recognition, customer loyalty to brand, image and reputation, competitive advantages as well as the evaluation of strengths and weaknesses of a brand. On the basis of the market research of the Lenovo Company, it is possible to learn how effectively the changes in the operational management should be applied.
In the process of evaluation and measurement, it is necessary to use the mediated indicators such as efficiency, quality, multidimensional growth, stability, flexibility and adaptation, readiness for organizational changes, efficiency of the used mechanisms of strategic management, and control. For the complex assessment of the operational excellence, it is necessary to define how precisely the Lenovo Company goes towards a goal and realizes the problems of the operational management.
Considering the product leadership by Lenovo, it is necessary to consider how much it meets the requirements of the external environment and its dynamics. Therefore, in modern conditions, the perspective effective strategy of the product leadership will be aimed not only at the technological rearmament production of the company but also at the development of the new systems of analysis, management and control of the companys activity. For the assessment of the product leadership, it is necessary to choose the criterion of the set of qualities and indicators of comparison by means of which the assessment is conducted. The problem of the search for criterion is the fact that there are a lot of criteria, but the subject of the definite analysis is strictly limited.
The customer intimacy can be measured through close interaction of the company with its customers. The constant feedbacks and surveys on the satisfaction of customers with Lenovo production as well as consideration of all personal needs in product development compose the assessment criteria for the implementation of the customer intimacy recommendation.
Thus, the ability of the company to introduce fast changes, readiness to accept the risk and flexibility in decision-making becomes rather significant. The efficiency of the realization of the new Lenovo strategy aimed at the operational excellence, product leadership and customer intimacy can be implemented irrespective of the impact of the external environment. Therefore, such choice should be focused not only on the embodiment of the ultimate goal but also on the maximum efficiency of intermediate decisions. The assessment of intermediate decisions allows tracking the efficiency of the whole tree of decisions and to define the possible deviations quantitatively in the course of the realization of strategic objectives.
Implementation and Transition Management
The increase of the efficiency of Lenovos business activity and, as a result, the competitiveness of the company is the task the fulfillment of which will define the success of the company in the conditions of the market economy. The thoroughly planed innovative plan will help the company to win more emerging markets and strengthen its positions in the existing ones. The plan will comprise the following stages:
1. To reconsider the positioning of the company in the market. It requires the Lenovos concept, mission, goals, philosophy, brands legend, as well as verbal attribution;
2. To communicate with the target audiences by means of such techniques as:
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Persuasion and informing. All marketing communications of Lenovo should be directed at the provision of the certain information to the target audience or to convince it to change the attitude or behavior;
Goals. All marketing communications of the company should be aimed at solving certain problems, which should correspond to the main goals of the communicative program. This technique is comprised of the customers awareness about the trademark, the increase of the market culture, the creation of the positive image of the company and its trademark;
Places of contacts. For successful work in the market, Lenovo should communicate with customers in all possible places. The marketing specialists should plan all possible contacts in advance, for example, the contacts arising in the course of an advertising campaign. The unplanned contacts can be conducted as a result of the distribution of the certain information obtained by customers;
The members of the marketing process should include all interested parties such as companys employees, sellers, suppliers, mass media and customers.
3. To improve the marketing plan aimed at the increase of the common volume of the sales of goods. There is the supposed increase in sales volumes proceeding from the available data on the market condition and tendencies of demand for the definite types of Lenovo production. It is necessary to develop the sale forecast, plan specific goals for divisions in the field of marketing, develop the action plan for marketing and consolidate the data on structural divisions of Lenovo.
4. To expand the client base of Lenovo by means of the improvement of the customer service quality. The clients of Lenovo, whose complaints were taken into consideration and satisfied, often become more returning customers, thereby generating profit of the company. The discounts for the returning customers as well as loyal programs for new clients compose the base of the effective expansion of the client base and the promotion of the Lenovo brand in the global market.
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