Current Trends in Management

CURRENT TERNDS IN MANAGEMENT

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Lenovo
Lenovo Group Limited is a Chinese-based multinational computer technology corporation that
develops, manufactures and markets desktops and notebook personal
computers, workstations, servers, storage drives, IT management software, and related services.
Incorporated as Legend in Hong Kong in 1988, Lenovo’s principal operations are currently
located in Beijing, China, Morrisville, North Carolina in the United States, and Singapore, with
research centers in those locations, as well as Shanghai, Shenzhen, Xiamen, and Chengdu in
China, and Yamato in Kanagawa Prefecture, Japan. Lenovo acquired the former IBM PC
Company Division, which marketed the ThinkPad line of notebook PCs, in 2005 for
approximately $1.75 billion.

In 2009, Lenovo was the fourth largest vendor of personal computers in the world. The company
is the largest seller of PCs in China, with a 28.6% share of the China market, according to
research firm IDC in July, 2009. It reported annual sales of $14.9 billion for the fiscal year
ending 2008/2009 (ending March 31, 2009).

Lenovo markets its products directly to consumers, small to medium size businesses, and large
enterprises, as well as through online sales, company-owned stores (in China only), chain
retailers, and major technology distributors and vendors.

On September 4, 2009, Ocean wide Holdings Group, a private investment firm based in Beijing,
bought 29% of Legend Holdings, the parent company of Lenovo, for 2.76 billion Yuan ($404.1
million). Legend Holdings is the asset management unit of the Chinese Academy of Sciences.

On November 27, 2009, Lenovo Group announced its intention to purchase Lenovo Mobile
Communication Technology. Lenovo Mobile now ranks No.3 in China’s mobile handset market.
As of October 31, 2008, 50.4% of Lenovo is owned by public shareholders, 42.3% by Legend
Holdings Limited, 6.6% by Texas Pacific Group (TPG Capital), General Atlantic LLC and New
bridge Capital and 0.7% by the directors. Because the Chinese Academy of Sciences, a Chinese
government agency, owns 65% of Legend Holdings, effectively the Chinese government owns
about 27% of Lenovo and is the largest shareholder.

IBM became the owner of 18.9% of Lenovo in 2005 as part of Lenovo's acquisition of the IBM
personal computing division. Since then IBM has steadily lowered its shareholding in Lenovo. In
July 2008 the IBM shareholding went below the 5% reporting disclosure threshold. In February
2009 the CEO Bil Amelio was replaced with Yang Yuanqing. An agreement allows Lenovo to
sell IBM-branded desktops and laptops until 2010.

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Lenovo makes a variety of products for world wide sale. These products include:

 Lenovo Think Centre desktops

 Lenovo ThinkPad laptops and tablets
 Lenovo Think Station workstations
 Lenovo Think Server servers
 Idea Centre desktops
 Idea Pad consumer-oriented laptops
 Lenovo 3000 J Series desktops
 Lenovo 3000 C, N, and V Series laptops
 LCD and CRT monitors
 Think Vision projectors and monitors

Lenovo may not be considered tech royalty, but it's definitely blue-blooded. It remains a leader
in China, but the company now has a global presence. It also offers IT management software
under the Think Vantage name. Lenovo's principal facilities are in Beijing; Morrisville, North
Carolina; and Singapore. It has research centers in China, Japan, and the US. Lenovo generates
about half of its revenues in China and the greater Asia/Pacific region. Lenovo’s strengths arise
from its roots as the first “New World” company, with a multicultural heritage that combines the
best of both the East and West. A significant advantage lies our ability to distribute management,
operations, processes and production in strategic global hubs of excellence and derive the best
talent, ideas, efficiencies from around the globe, thereby establishing a model of World sourcing,
and a new way of doing business. Through this decentralized strategy, Lenovo has been able to
transcend geographic borders, break cultural challenges, and encourage the spirit of innovation
and new thinking across our teams. The company’s Global Marketing Hub in Bangalore is
significant in reiterating the concept of World sourcing. The Hub helps to effectively deliver
Lenovo’s marketing messages around the world by maintaining a consistent global brand image.

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The China Triumph:

So how does the Lenovo model work in China? It sells through 6,000 outlets. In spite of its vast
reach, it operates with a lean structure and cost efficiencies are so well built in that even the
office space allotted to the staff is planned and accounted for. Every PC sold is tracked to its last
mile. The service centre network is spread wide across the nation to enable prompt service.

Lenovo manages to reach even the inner parts of China. Lenovo sells to distributors who sell to
retailers and then it reaches customers. They know the inventory at every step, and post sales
service is very important. The whole thing is to develop each partner, not just build a large
number of partners. In China, Lenovo has partners where it has a very large share of customer’s
wallets. A lot of outlets, few partners, a lot of alignment, is the strategy Lenovo follows.

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Operations in India:
The Indian market is slightly different. For starters it is much smaller. At roughly around 8
million units a year, it is a sixth of China’s market. For Lenovo though, to win in Asia, it
believes it has to win India. Last year, even as its sales in Brazil, Russia and China grew despite
the slowdown, its sales in India tanked. A poor performance in India, one of the most promising
markets in the world, is hurting Lenovo. Its total market share in India according to IDC is only
about 5 percent and it’s the number five player in the market.

What gives Lenovo, the confidence to transplant their China learning’s to Indian markets is the
similarity in the trade characteristics in both countries. Lenovo India is at the same stage of
evolution where China was 10 years ago. Lenovo had a single digit market share in China just 10
years ago. Today, it commands a significant lead in market share over its competitors.

China and India both operate with channel partners comprising distributors and retail stores. In
China, Lenovo has a six-tier structure. For India, the company has instituted a three-tier model
consisting of four national distributors at the top who serve the seven regions India is split into.
To address conflict of interest among distributors, as a rule not more than three Tier 1
distributors are allotted to a specified region. Lenovo did this so that distributors can have a
larger overall share of the market and it builds a sustained interest among them in selling Lenovo
products.

Just like China, even in India Lenovo is getting its large channel partners to be almost a part of
the company. Lenovo identified 25 large retailers, and started engaging them early. Lenovo India
also plans to ape the Chinese integrated operations model where all functions from product
development to marketing, sales, supply chain and services are closely linked for speed and
efficiency. Pre-planning and forecasting is the norm in China and the same is now being
practiced in India. Products like a notebook are perishable commodities — so you can’t have a
long supply chain, hence tight planning is mandatory. This helps saving transportation cost and
products can be shipped instead of flying them in. Thus, margins that are wafer thin in the
business can be saved and competitive pressures built in the market.

Lenovo Group Ltd. moved worldwide marketing services such as creative development to a new
hub in Bangalore, India with marketing communications firm Ogilvy & Mather Worldwide Inc.
The new center offered these services to all of Lenovo's operations outside China. Lenovo's
Innovation Centers are designed to create a place where business customers, software vendors
and solution providers can develop new personal computer software solutions.

The Lenovo brand in India has been successfully positioned in India. The company has built a
product portfolio that appeals to all business segments – enterprise, SMB and consumer. The
company has also developed a channel-to-market that reflects its ambitions in the Middle East
market. “Lenovo has relentlessly committed to innovation and has introduced a lot of industry
firsts, constantly raising the standards for users in the enterprise, SMB and consumer segments.

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We deliver the most exceptionally engineered PCs and have been continually innovating
according to customer demands.”

Locally, Lenovo commands tremendous brand awareness among consumers, loyalty and strength
from its business partners, which we consider key organizational strengths in our quest to take
leadership position in the market. Over the last few years, in India Lenovo has delivered world-
class products such as the ThinkPad X300, Think Centre A61e energy-efficient desktop, Lenovo
U110 ultraportable, Lenovo Y430 multimedia notebook and the S10 net book, which reiterate
the brand proposition of offering exceptionally engineered PCs. “Lenovo has an array of
notebooks with a host of game-changing technologies that address the diverse and demanding
consumer profile in India for business, entertainment, gaming or day-to-day computing needs.”

Regional marketing and promotion events form a significant focus in Lenovo’s business this
year. Geographically, the company’s approach is divided into North, East, West and South
regions, which are then sub-divided into multiple territories. Along with our teams in these
territories, we plan for region-level and partner-focused events and activities to promote new
products and offers. An example is the IT EXPO in Bhubaneswar, Orissa, which was held during
the last week of December 2008, and for which Lenovo was the main sponsor. The event is a
major IT exhibition locally, catering to the IT, communication and consumer needs. The event
had tremendous support from the State Government, and attracted walk-ins of over 1 lakh people
in five days.

Lenovo’s current channel presence in India spans across 450 cities, with over 3,500 Business
Partners, who are a significant part of Lenovo’s business and growth. The company is geared
towards expansion of retail stores through Lenovo Exclusive Outlets (LES) and multi-brand
stores in the C and D class cities, which ‘we believe have the growth potential in India. Lenovo
is committed to enhance their partners’ profitability and reduce bottlenecks to ensure a smooth
and efficient association. Lenovo’s partners are high in their priorities, and their approach is to
work together with them in addressing challenges, such as the current economic downturn. In
India, Lenovo is continuing with its go-to-market strategy of having national distributors, and
working with tier-2 approach of having channel partners in the retail space. However, the
company will now also be working with regional distributors who will cater to partners which
the national distributors will not be able to reach. The regional distribution model will mainly
address the tier-2 and 3 cities, which is an important market segment. Lenovo works with 11
national distributors, and is also working with select regional distributors to reach tier-2 and 3
cities, which do not come under the purview of the national distributors. Lenovo has always
aimed towards the growth of its channel partners and has taken various initiatives for their
growth and profitability.

With the Indian SMBs growing quickly, they increasingly look towards out-of-the-box solutions
specifically designed to achieve robust performance and productive computing experience. The
SMB segment will offer continued promise for Lenovo India, especially as IT penetration in the
tier II and tier III cities will increase.

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Current Events:

 Lenovo has 7.3% share in the Indian PC market, according to the IDC report for the
quarter of July to September 2009.

 Lenovo Group opened its first flagship store in India in Nehru Place, New Delhi.

 Lenovo Group to shut one of its Indian manufacturing facilities to improve production
efficiency.

 Lenovo introduced the first Nvidia Ion platform based Idea Pad S12 net book.

 Lenovo introduced the H200, a desktop PC for consumers seeking high-value computing
at a low cost.

 Lenovo rolls out PC with windows 7 operating system.

 Lenovo has announced its business strategy to pursue the significant growth opportunity
in the small and medium business (SMB) segment in India's PC market. The company is
extending its ThinkPad brand promise to SMB users in the country through its "ThinkPad
Edge Series" laptops, which combine the reliability of the ThinkPad with style and
affordability.

 Lenovo announced its LePhone at CES 010 and it’s Lenovo’s first smart phone. It is
powered by Android and meant for the Chinese market.

 The O1, China's first 3G O-phone, formally launched by Lenovo in Beijing this week.

 Global PC Company Lenovo Teams Up with Leading Formula 1 Team Vodafone

McLaren Mercedes

 Lenovo ThinkPad X301 is India’s ‘Best Computing Gadget of the Year 2009’

 Lenovo announced an aggressive business strategy to pursue the significant growth

opportunity in the Small and Medium Business (SMB) segment in India’s PC market.

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Conclusion:

It has been almost four years since Lenovo acquired IBM’s personal computer business for $1.75
billion in cash, stock and debt. At a stroke, Lenovo vaulted from being the world’s eighth-largest
PC maker to the third-largest, after Dell and Hewlett-Packard. When Legend Computer took lead
in PC sales in China way back in 1997, it was predicted by experts that the company will
eventually cease to rule due to the pressure from global majors. That Lenovo has targeted India
as one of its biggest markets. As an emerging market, India is placed highly in Lenovo’s
priorities. A long-term growth market, India also plays a significant role in our global operations,
as our supply chain strategy extends here with two local plants. The Lenovo brand in India has
been successfully positioned in India with Saif Ali Khan and Soha Ali khan as its brand
ambassadors. Products from China have always been a success with the Indian consumers.

With, Lenovo aiming towards the growth of its channel partners and has taken various initiatives
for their growth and profitability. Lenovo commands tremendous brand awareness among
consumers, loyalty and strength from its business partners, which makes sure that Lenovo
deserves a place the top five PC provider company in India.

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