Lenovo's Marketing Strategy - Essay Example

Introduction

Lenovo is not a new name in the world of electronics; yet, it has been only recently that it was able to expand globally. With this in mind, it may be quite helpful to analyze the manner in which it will market its products in the European market. This paper presents an in-depth analysis of its marketing strategy in this particular region.

SWOT analysis

To begin with, one should point out that Lenovo possesses a number of strengths. As Ma (2009) suggest this company features effective vertical integration which means that global expansion will not dilute its culture and will not reduce its effectiveness. Moreover, its production facilities are situated in China which results in low cost of production. Finally, the company boasts a rather strong patent portfolio that it acquired over the years.

However, there are some weaknesses that can be identified as well. First of all, the brand awareness is quite low, especially if compared to its more famous competitors. Moreover, "country of origin" effect, in this case, will be negative since many consumers are not likely to trust Chinese brands. Lastly, there is little differentiation that is found in the products.

Speaking of the opportunities that lie ahead of this company, one should note the following. Christensen (2015) believes that the market for electronic devices will grow in the future and this provides a wonderful opportunity for Lenovo. Moreover, given the positive state of financial affairs, the company in question may acquire new patents and improve the performance of its devices even more.

Nevertheless, there are certain threats that should be mentioned. Needless to say, that the technological progress is unstoppable and what is considered to be innovative today will be outdated tomorrow. This means that the company will have to innovate to keep up with the pace. Moreover, the market for major electronic products is quite saturated. As a result, the competition is intense.

Marketing mix

If Lenovo wants to be successful in the European market it should design the marketing mix in the following manner. Speaking of the product, the company in question should focus on all major categories of electronic devices. Hoisington (2014) notes that Lenovo is capable of producing everything ranging from the most ordinary desktop PCs to servers and wearable devices which means that it is able to offer a wide selection of products.

As for the price, the company should adhere to the strategy that it chose long ago. Thus, Lenovo is known for its outstanding quality and price that is slightly lower than the one of its competitors. Indeed, people in Europe may be rather price sensitive. That is why they might prefer a less expensive device to a more expensive device even though the functionality will be almost the same.

Mueller (2015) notes that Lenovo relies both on brick and mortar store to sell its product as well as on its online store. This may be a rather effective approach that will turn out to be quite beneficial in Europe. Indeed, the brick and mortar stores will contribute to brand awareness while the online store will offer additional functionality.

Finally, one should also consider the promotion of the product. Given low name recognition, it is essential to focus on this element of the marketing mix. It may be quite advantageous to utilize different channels. For example, print advertising should be combined with promotion in the social media. In addition to that, it may be particularly helpful to engage local well-known celebrities in endorsing the product.

Porter’s Five Forces

It may also be quite helpful to apply the framework which was developed by Michael Porter to the company in question. Mukherjee (2014) shows that in terms of bargaining power, the buyers should not be regarded as important players. Indeed, they are responsible for the generation of the revenue, but since the market is so big, the company is always able to find the category of consumers who will buy the product. Therefore, this force is low.

Speaking of the bargaining power of the suppliers, one should not that this is moderate. Lenovo, just like the majority of major companies in the industry, does not produce the product. That is why its relationship to the suppliers should be recognized as an important one. However, the bargaining power of the latter is moderate and not high, because they do not want to lose such a powerful partners and would like to find a mutually acceptable way of doing business.

If on considers the threat of new entrant, one will have to note that it should be regarded as quite low. MacIntosh and Maclean (2014) show that it takes a considerable amount of capital, intellectual property, and human resources to enter the industry which makes it rather unlikely to witness a new player in it.

Contrary to that, the threat of substitutes should be seen as rather high. In spite of the fact that Lenovo keeps the prices low, some people may refrain from buying only its products. Given the compatibility among the devices, it is quite easy for a contemporary user to switch to a different brand.

All this leads to the understanding that the competitive rivalry is quite intense. Hitt, Ireland, and Hoskisson (2014) report that there are three major top players in the industry, Lenovo, HP, and Dell, but the actual difference between the products is insignificant. Therefore, they have to compete hard to retain their share of the market.

PESTEL analysis

There is a number of external factors that have to be taken into consideration while examining Lenovo's penetration of the European market. First of all, there are certain political issues. Thus, the company in question is a Chinese company which means that it will have to adhere to the rule and regulations issued by different countries that it operates it. Given the differences between China and the European Union in many aspects, the company should be ready to solve all possible issues.

As it has already been mentioned, Lenovo has located its major production facilities in China which conditioned the low cost of the product. Moreover, Cavusgil (2012) suggest that nowadays the majority of the world experiences economic growth and various gadgets have been more affordable than ever.

One should also consider the social aspect. It would not be an exaggeration to suggest that electronic devices have occupied an important place in our lives. That is why there is an imperative to buy personal computers or smartphones since they will make one’s life easier and more enjoyable. The company in question may capitalize on this trend.

It is rather obvious that without great technological development, Lenovo would not be so successful. Vulich (2016) insists that today the processing capacity of ordinary devices is many times higher than the one of their counterparts from the past, and the physical measurements of the former are significantly smaller. As a result, technology is not something that is suitable for labs but is something that is to be found in every living room.

The environmental aspect should also be considered. While some might suggest that electronic devices are not directly responsible for polluting the environment, in contrast to cars, there are still some issues that can be identified. First of all, the devices are produced on plants that may have a devastating carbon footprint. Moreover, the gadgets over include materials that if disposed of in the wrong way will be hazardous to the environment.

Finally, one should consider the legal dimension of the issue. Chaudhry and Zimmerman (2013) insist that protection of intellectual property is a significant issue in the industry. Indeed, Lenovo has systematically acquired companies that would expand its patent portfolio and would allow it to create outstanding gadgets without infringing any copyright laws.

Segmentation, targeting, positioning

Segmentation is one of the keys to understanding the best way to expand into Europe. It must be noted that Lenovo has evolved so much that its operations cover the entire world. Speaking of the income of the consumers, it would not be an exaggeration to suggest that the company in question focuses on the segment which includes moderate and low income. The consumers that are likely to comprise this segment are also quite innovative.

As for targeting, the evidence shows that the Lenovo has a distinct category of consumers that it addressed. Morrison (2009) notes that it is traditionally strong in serving corporate customers, given its long partnership with IBM. In addition to that, it is obvious that young and creative people are targeted by the innovative products that transgress the conventional limits (consider the promotion of Lenovo Yoga).

If one considers positioning, it becomes of obvious that the company in question is seen as the producer of products that have outstanding quality and affordable prices. For examples, its smartphones may not have the same characteristics as flagship devices of leading companies, but they are significantly better that the average device in the industry and the price is quite attractive.

Corporate social responsibility

Just like any other successful contemporary company, Lenovo pays a considerable amount of attention to the environment. There are several directions in which it applies its efforts. First of all, the company works hard to reduce the number of greenhouse gas emissions (“Thinking Green”, 2016). It actively cooperates with leading environmental agencies and adheres to every regulation.

Waste management has also been an important topic to consider. Lenovo acknowledges that it engaged both non-hazardous and hazardous material and systematically works to decrease the number of the latter. This may be particularly important since with the rapid technological development, an average consumer buys a new device almost every year and the old one needs to be properly disposed of.

Finally, one should also consider water management. The experts of Lenovo suggest that the company uses little or no water during the production of its products and the major source of water consumption is the staff and sanitation. Nevertheless, the company tries to minimize its water footprint and sponsors research of viable alternatives for the future.

How has Lenovo become so successful?

It may also be beneficial to take a close look at the history of the company and identify the important steps that it took which all together brought it to the position it currently enjoys. Thus, the story of Lenovo is the story of thoughtful acquisitions and joint ventures. In 2005, the company acquired ThinkPad brand from IBM and reinforced its presence in the personal computer segment. Ten years later it bought the server division of IBM, expanding its share in this category of devices. There are several joint ventures that should be mentioned as well. Gong (2013) insists that the company in question was able to cooperate with NEC and EMC both of which are successful players in the local market.

It must be noted that this pattern of development through acquisition has not ended. Raguž, Podrug, and Jelenc (2016) mentioned that Lenovo bought Motorola from Google and is planning to use this brand in the West to attract people. The same can be said about Medion which is a popular brand in Germany: by acquiring it, Lenovo secured a significant share of the market in this country.

Strategy of Lenovo in Europe

Given all the factors mentioned in the previous section, one might outline the strategy of Lenovo in the following manner. First of all, it is highly likely that this company will use popular brands that it acquires, such as Motorola and Medion, in the European countries since it will try to capitalize on brand awareness of them.

Speaking of the balance between price and quality, it is likely to remain the same. Indeed, Lenovo will present products that have great characteristics and will cost less than their competitors due to the low cost of production. This will probably allow the company to enjoy a large share of the market.

Finally, the company will attract new consumers with its innovative device. Indeed, Lenovo has numerous R&D centers and with the available patent portfolio, it is able to produce devices that will enable the consumer to more than their more expensive counterparts. As a result, the target audience will be open for experiments and is likely to favor new products manufactured by Lenovo.

Impact of Brexit

One would make no mistake suggesting that Brexit is a geopolitical event that no one could have predicted. That is why Lenovo will have to introduce changes into its expansion strategy in order to adapt to the new conditions. The first and the most important aspect of the impact is the necessity to comply with a new set of rules and regulations – the one applicable in the United Kingdom.

Secondly, it is quite possible that the changes in the domestic economy with temporarily reduce the desire of the British consumers to buy new electronic devices. That is why it is quite possible that the UK will not be the region of Europe that will present outstanding sales figures. As a result, Lenovo may be willing to focus on other parts of it.

Conclusion

Having examined all the points which were mentioned in the paragraphs above, one is able to come to the following conclusion: Europe holds a considerable amount of potential for Lenovo which can be unlocked with the help of the correct marketing strategy. It is essential for the company in question to maintain the high quality of the products, keep the production costs low, and continues its beneficial acquisition strategy that reinforces the brand.