Lenovo Case Analysis free essay sample

Case Analysis Situation Analysis Chinese super brand Lenovo, formerly formed as Legend, has seen itself rise from being a mere imported parts distributor into its country’s largest computer manufacturer as well as being the world’s fourth. The company now has branches world-wide and has experienced successful growths since its establishment in 1984. Lenovo SWOT breakdown: Strengths: Lenovo has a mass and strong relationship with their domestic customer base. Being a homegrown company certainly helped Lenovo in understanding and molding its computer lines into products that Chinese consumers loyally appealed to. The company also long established very efficient distribution and marketing functions. Weaknesses: In the end of 2003, they experienced a falling stock price, declines in PC shipments and managerial confusion. Albeit a strong customer relationship and distribution system, they still lag behind what Dell has specialized. Opportunities: Domestically, PC shipments in all regions of China is projected to increase so Lenovo can obtain those demands. Additionally, the medium to higher market segments such as medium businesses and the government continue to have a foreseeable increase in PC usage. Globally, there are substantial increases in demand and shipments of computers especially in Asia. Threats: The biggest threat the company has is facing increased competition from brands from both overseas and in China, especially from Dell where it held the second market share in the Chinese market. The market has become much saturated and the consumer perspective move from PCs being ‘luxurious’ to ‘commodities’ type products could turn risky to Lenovo. Problem/Key Issue The changing dynamics of the computer industry would be the basis of the problems experienced by Lenovo (and other firms in the market). Market saturation, entering and upgrading competencies of new and existing firms, the perspective of ‘commodity’ computers by consumers and the need to create new methods of selling and services all amount to the difficulties Lenovo is faced with a tougher market. Alternative Actions 1. Continue operating with innovations – As projected sales and shipments suggest that the company can still grow and gain more or at least the same profits, there is no rush for Lenovo to change any of their operating strategies for a period of time. 2. Modify the company’s product mix – In this suggestion, Lenovo would need to move from their major emphasis on computers to mobile handsets instead. 3. Consolidate its various businesses (focusing domestically) – By merging its different businesses of desktops, laptops, handheld computers and mobile handsets and focusing on only one main business. 4. Emphasize foreign operations (focusing abroad) – Lenovo would pool in resources to concentrate on foreign operations; entering, penetrating and gaining new market share or improving foreign existing market share. Evaluation of Alternatives 1. Continue operating without alterations – I) Advantages: Ability to maintain high profit levels, zero costs of change implementations, II) Disadvantages: Prone to future threats of consumer demand change or new competitors, would not be able to obtain new market shares, 2. Modify the company’s product mix – I) Advantages: Expanding businesses not specialized before (mobile handhelds), II) Disadvantages: Complications on deciding which products to specialize 3. Consolidate its various businesses (focusing domestically) I) Advantages: Lowering costs, emphasizing the strengths on manufacturing computers, lowers risks, pooling of resources II) Disadvantages: Lower risks means lower returns, 4. Emphasize foreign operations (focusing abroad) I) Advantages: Gaining new market shares II) Disadvantages: Uncertain market knowledge denotes risks Recommendation The next step from the above mentioned possibilities for Lenovo to choose best would be a mixture of the first and the fourth recommendation. I. Strategic Intent: To be proficient as a computer manufacturer domestically and internationally. II. Strategic Mission: A continuance on domestic domination by offering consistently up-to-standard products and to penetrate/garner a significant improvement in foreign markets. III. Key Result Areas (KRAs): A. International Department: Lenovo must ensure that this department is set up efficiently to conduct transactions, negotiations and sales abroad. They would need to separate their department into different divisions that specialize in locating, entering, penetrating, and gaining foreign knowledge. B. Research and Development Department: Since market saturation will cause problems to the firm, Lenovo’s RD department must be up-to-date, creative, innovative and would need to be pushing towards inventing new technologies. IV. Strategies: (Two alternatives are selected. The first alternative will continue in the background whilst the second alternative will be the method that Lenovo would carry out extensively. ) A. Initial Phase: The international department would first gather data and information of various countries then would nominate a country as the most possible candidate e. g. Thailand or India because of their PC usage growth. B. Product Modification: Once the target country is selected, the country and the consumer data would be collected. When gained, these data would be used to modify the computer models to suit the selected country. The process of entering would also be chosen. C. Foreign Phase: The modified product would be entered into the country and the international department would monitor its progress. D. Background Operations: Lenovo would still be creating and investing in research and development. They would need to ensure that they allocate appropriate funds and resources towards the RD department. V. Objectives: 1. To maintain significant market share in the Chinese domestic market. 2. To continue bringing innovative products into the market domestically. 3. To increase foreign to domestic sales ratio.