How Lenovo adds Value to its Strategic Position - Case Study Example

Business strategy Contents Introduction 4 Lenovo laptop’s Strategic Position and Major Competitors 4 Porters Generic Strategies 5 Lenovo vs. Main Competitors 6 Bowman’s Strategy Clock 8 Strategic group mapping 9 External Environment Analysis and the Key External Drivers affect on Lenovo. 11 PESTLE Analysis 11 External Forces 11 Affect on Lenovo 11 Key Drivers for Change 14 Porter’s 5 Forces Industry Analysis 15 Resource Audit 16 Resource and competency analysis 17 The Lenovo value chain 18 Infrastructure 18 H.R. Management 19 Technology Development 19 Procurement 19 Conclusion 20 References 22 Introduction Lenovo is a Chinese company. The company was founded in1984. Head quarter of the company is based in Beijing. In 2005 the organization acquired IBM personal computer. In 2009 the organization launched its first essential laptops. Lenovo lap top has its presence in almost 160 countries in the world. In this essay business strategy of Lenovo laptops will be discussed with the help of different theories and models. In the course of this essay porters generic strategies, Bowman’s Strategy clock, Strategic group mapping, PESTEL analysis and porter’s five forces model will be discussed. Core competencies of the organization will be discussed. Value chain and resources of Lenovo laptops will help significantly. The essay will follow a step by step approach (Michael, 2006). Lenovo laptop’s Strategic Position and Major Competitors Lenovo laptops are performing very well. Sales of Lenovo laptop have increased almost 5% and it has reached to $4.7 billion. Laptop division of the organization is providing 52% of total organization revenue. Here this report will focuses on three different products of Lenovo laptop. Lenovo S series 215, U series 430 and Think pad yoga Ultra book. To understand strategic positioning of these three products Porters Generic Strategies will be used. This theory will be discussed on the basis of three strategies. Cost leadership is a strategy where the organization set their product cost very suitable with price sensitive customers. Here in this strategy low price of the product is the main strategic objective of the organization. In this strategy Organization wants to capture market share with lowest possible price. In differentiation strategy innovative products are being used for competing in the market. In this strategy targeted customers are not price sensitive. Focus is strategy where organizations go for very small number of targeted customers. These are premium products of organization. Here customers are having very specific needs and customers are not at all price sensitive. This strategy is not designed for every person. It has been designed for selected persons. Porters Generic Strategies Strategy Device Justification Very much cost saving. Only $379.00. Well within the reach of common people. The product is very thin and light in nature. AMD processor is there. Size is 11.6 inches. Windows 8.1 operating system. 4GB memory Cost Leadership 3cell battery. Maintenance is very simple. Dolby audio system. Data transfer is very fast. S series 215 It is very portable in nature. Differentiation U series 430 Price is $549.00. Display is larger. It has 14 inches display. Processor is also very good. 4g Intel i3 processor. 4 cell battery. Very stylish and elegant look is there. Will offer extra excitements. 10 hours battery life is there. Thickness of the product is very small less than 1 inch. Price is $901.55. 8 cell battery. Premium and sophisticated looks. Not for common people. Focus Intel high definition graphics is there. 12.5 inches display and display can rotate 360 degree. It is generally used for multidimensional business. Durability is rock solid. Can be used in 4 different modes like Stand, tablet, laptop, and tent. Battery life is 8 hours. ThinkPad Yoga Ultra book It is very clear from the all three strategies that the organization has array of different products and those products are satisfying different income group people. These three strategies are designed for different needs of the customers. With help of this strategy the organization is successfully targeting all customer segments. Lenovo vs. Main Competitors Operating Memory Display Battery Price. System Processor S series 215 Windows 8.1 4.0GB AMD E1-2100 Processor 11.6" 6hours $379.00. U series 430 Windows 8.1 4.0GB 4th Generation Intel Core i3- 14" 10 hours $549.00 ThinkPad Yoga Ultra book Windows 8.1 4GB 4th Gen Intel Core i3 12.5" 8 hours $901.55 Dell Inspiron 15 Windows 8.1 4GB Memory Intel Celeron Processor (Dual Core) 15.6" 8hrs $249 Samsung ATIV Book 9 Plus ( Windows 8.1 8GB Intel® Core™ i7 13.3" 6hrs $1,799.99 Sony VAIO Tap 11 Windows 8 4GB Intel Pentium 3560Y 11.6" 8hrs $ 799.99 Apple MacBook Air MD760LL/B OS X Mavericks 4 GB Intel Core i5 13.3" 6hrs $949.99 These data are very helpful for understanding different competitors with Samsung. Bowman’s Strategy Clock will be applied. It would give more in depth analysis in 8 specific groups. Bowmen clock will analyze relationship between consumer’s perceived value and price of products. Bowman’s Strategy Clock (Source: William, 2009) Here in the Bowman’s Strategy Clock Lenovo S series is on the 1 plot. It shows that Lenovo S series has low price and low perceived value. Lenovo U Series is in the 4th plot of the clock. It is in differentiation plot where price is not that much high but perceived value out of that product is very high. According to the clock Lenovo U Series is at that position. Think pad yoga ultra book is in 5th plot of the clock which represent focused differentiation. This is a designer product of Lenovo. Perceived value is high and cost is also high. People at this plot will buy the product on the basis of perceived value of the product. Its competitors like Samsung ATIV Book 9Plus and Apple MacBook are in the same position both are in plot 5. Sony VIO is in 4th plot. Dell inspiron is in 2nd plot means it is a low cost product. Strategic group mapping ( Source: Hephaestus, 2011) (Source: Ling, 2006) It is very clear from the picture that dell is having higher market share both in USA and in global perspective. Samsung is having lowest market share both in globally and in USA market. It very evident that Apple Mac book is having very good share both in USA and globally. Sony VAIO has very good share in global and American market. In USA market Lenovo market share is pretty good in comparison to global market. It clarifies that in USA market competition between Apple and Lenovo laptop is very close. Dell is having very high market share. According to the graph globally Apple is having second position in terms of market share. Lenovo is having 3rd highest market share globally. (Source: James, 2005) The graph is showing that Samsung and Apple are on the same place. Both these two brands have same combination of display size and battery backup. Dell is having highest display size but Lenovo is having highest battery backups. On the other hand Sony VAIO is having good battery backup but display size is smallest among other competitors. Lenovo is also having 2nd highest display size in comparison to other competitors. Samsung and Apple having lowest battery life cycle in compare to other competitors. External Environment Analysis and the Key External Drivers affect on Lenovo. This section of the essay external environment of Lenovo laptop will be discussed. During the course of this discussion PESTEL analysis will be done. Apart from PESTEL analysis different key drivers for the organization will go to be discussed. PESTLE Analysis External Forces Affect on Lenovo Political Political situations are different in different countries. Politics is an inseparable part of global business. As the political situations changes policy also changes. The organization must monitor each and every political scenario of different countries. It has to be very much vigil and proactive. Changing policies can bring lots of opportunities for Lenovo. On the other hand it can be a serious disaster for the organization Economical Global economic condition is very much volatile. Financial crisis can directly affect the organization. As the global economy is going through a bad patch it will certainly decrease the disposable income of customer. It may hurt businesses of Lenovo laptop. Social Young generation of global market are very much technology friendly. They always search for better technical products (Frederic, Agnes and John, 2011). It certainly opens huge opportunity for the organization. Lenovo laptop has to understand ever-changing consumer behavior of global society. According to that they can create more new things. Technological Technology is ever changing (Chaston, 2004). Being a laptop company technology has most direct affect on the organization. Day by day cost of technology is increasing. New innovative technologies are making competition fiercer for Lenovo. Legal Legal structures are very different in different countries (Kozami, 2002). As a global player the organization has to abide by different legal rules in different countries. There is no option for the organization to compromise with different legal aspects in different countries. Lenovo has to be very precise about their legal aspects. Miss understandings in legal matters will be very harmful for the organization. Environmental Environment is a very important factor related with any business. Modern world is facing serious threats from environmental degradation. There are very strict laws regarding environmental sustainability. Environment is having very serious affect on the business of Lenovo. The company must contribute towards world environment to maintain sustainability in the market. Key Drivers for Change Research and development is very important driver for change. In modern day world each and every day new technologies are coming into the market. Older technologies are getting invalid. In this situation every modern organization focuses on R&D. It is a serious driver for change. In case of Lenovo also R&D is very much important for keeping track with changing situations (Jenster, Hayes and Smith, 2005). Social networking sites are also very important for the change in the organization. Modern day business organizations are using social networking sites significantly. Organizations are using Facebook, Twitter more than ever. It is changing the organization scenario and welcoming a fresh air of social media marketing in the organization (Chakravarty and Eliashberg, 2005). Customers want more and more smart devices. Laptops are such devices which is very easy to handle and can carry any where any place at any time. It provides mobility to customers. Now day’s sizes of laptops are so small that it can be carried in the back pocket also. Customers can perform their work while they are on the move (Hutt and Speh, 2012). Modern day human life is very busy. Saving time is very much important for any human being. With the help of laptops people can easily pay its mobile bill, electricity bills can perform different banking transactions also. This modern fast world is also a key driver for change (Reuvid, 2012). Porter’s 5 Forces Industry Analysis This analysis will go to give competition picture for Lenovo laptops. Competitive Rivalry for Lenovo in the laptop industry is very high. There are lots of other big names are present in the market. They are also having different array of products. Prominent brands like Dell, Apple, Sony, Samsung, and Asus would provide fierce cut throat competition for the organization. Every competitor is investing a lot in to their R&D’S. Innovation is also very much continuous in this industry (Fitzroy, and Herbert, 2007). Bargaining powers of suppliers are very low. There are lots of organizations which are making different components needed for laptop. So Lenovo is having lots of options. As it is Chinese company it is very easy for the organization to get good quality electronics components in lesser price. As in China electronics products are in abundant and less costly. Power of buyer is very high for the organization. It is very common for this industry. There is lot of options for buyers. It is easy for customers to switch from one brand to another brand without too much problems. There is high amount of bargaining power is lying with buyers. Threat from new entrant is medium. It is very difficult to entering into this industry. It needs lot investment from the side of the entrant. But recently different local players are replicating different models and are coming up with different new brands. New entrant faces huge risk in this industry because customers most of the times go for reputed well known brand. This threat is medium. Threat from substitute products is high. Technology is changing. Modern day tablets and smart phones are very advance in nature that often customers chose to take tablet or smart phone instead of laptops. Smart phone are more easy to carry and very much handy. Prices are almost same as laptops. Threats from the substitute products are high for the company (Shapiro, and Glicksman, 2004). This is a good industry for the company. The company is growing pretty well in the industry. Resources and Core Competencies: How Lenovo adds Value to its Strategic Position It is very important for each and every organization to understand its resources and core competencies very well. It would help organization to get a clear picture about its strength. The organization must know that what they can better than its competitors. Resource Audit Physical: In 2013 the organization recorded $13012000 amount of inventory. It has almost 33000 employees in more than 160 countries in the world. The organization is having manufacturing unit around the world. It is fortune 500 companies and for the last four years organization has been fastest growing laptop making company in the world. Financial: The organization has recorded US$ Million170. Gross margin for the organization was 13.6%. Net current asset for the organization was 331$ million. Revenue of the organization was 8,787 $ million. Net cash reserve was 3,095 $ million. Operating margin for the organization was 2.3%. Earnings per share are 1.67. Financial resources of the organization are pretty good (General, 2010). Intangible: The organization has very good reputation worldwide. Experienced human resource is also an important intangible asset for the organization. The organization has very good relationship between management and workforces. Working atmosphere in Lenovo is very good and is certain intangible assess for the organization (Jason, 2010). Resource and competency analysis Industry Wide Sources of Competitive Advantage  Capital  Financing The organization has total good capital in its pocket. Total capital of the organization is 2,807 US$ Million. The organization has pretty good financial condition. In 2013 the organization has recorded more growth than previous year. The organization is having very modern equipment in its kitty. Equipments are very effective and giving huge competitive advantage to the organization. The organization has large infrastructure around the world. The organization has different range products which is giving significant competitive advantage to the organization. Necessary Resources  Equipment  Infrastructure Unique Resources  Base Technology  Human Capital Human capital is very important and the organization has very experienced workforce. The organization has almost 35,026 employees around the world. Empowered and highly dedicated employees are giving significant competitive advantages to the organization. The organization has very modern and up to date research and development wing where eminent scientists are working and the organization is getting great competitive advantages out of that (Ann, 2002).  R&D Threshold Competencies  Innovation Innovation and creativity is isolating the organization from other organization. The organization has huge customer base around the world. Its customer base in China is very much significant. Customer base of the organization making it very special within very small time. The organization has array of products. It is very competitive in terms of different types of products. Products are meant for all category people of the society making the organization ore and more competitive (Neil and Charles, 2010).  Customer Base Core Competencies  Product The Lenovo value chain Infrastructure The organization has very formidable infrastructure. Lenovo took over IBM server unit in 2005. It was a very bold step of the company. It has doubled the infrastructure of Lenovo. The organization has created converged infrastructure with EMC. Jointly they have designed VSPEX solutions. H.R. Management Lenovo laptop is very much committed towards its workforce. The organization has very supportive and cooperative work culture. The company is very much focused towards human rights. Technology Development The organization is very serious with their technology development. It believes in extensive research and development. The organization opened their Innovation Centre in Bangalore, India in 2006. Procurement Lenovo purchases their products from worldwide. Their total procurement policy is based upon principles, core values, and standard practices. The company measures suppliers performance regularly. Inbound Logistics Operations Outbound Logistics Marketing and sales Service The organization collects in bound logistics from other suppliers. The organization has a database of suppliers from which all raw materials are being collected. The organization does maintain a huge range of inbound logistics from different suppliers. The organization has very sophisticated inbound logistics system (Sandra, 2008). The organization has Different OEM partners through which the organization operates. Those OEM are Winstron, Compal three and Quanta. The organization has very well out bound logistic system. Logistic system is very much cost effective and time saving in nature. It helps the organization to save lots of time and money. Marketing and sales is also a very important part of the value chain. The organization has very strong marketing and sales teams. The organization provides very good service to its customers. Customer service is one of the most important parts of the organization. Conclusion Modern business is ever changing. Change is the only constant thing in the world. It is good for the company to change according to the situation. The organization has to be more and more pro active in nature. It must review its each and every strategy after regular interval of time. The organization must be very creative and innovative to maintain competitive sustainability. There is no short cut for the organization. At the same time organization must be very much aware with all social aspects and legalities. References Ann, B. 2002. Proceedings of the 9th European Conference on Information Technology Evaluation – 2002. London: Academic Conferences Limited. Chakravarty, A. K. and Eliashberg, J. 2005. Managing Business Interfaces: Marketing and Engineering Issues in the Supply Chain and Internet Domains. Berlin: Springer. Chaston, I. 2004. Knowledge-Based Marketing: The 21st Century Competitive Edge. New Delhi: SAGE. Fitzroy, P. and Herbert, J. M. 2007. 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