LENOVO GROUP LTD.

1.0 INTRODUCTION

Lenovo is one of the largest famous personal computer makers in the world. Today,

Lenovo strives to be the global market share leader in each of the market we serve.

On September 24, in 2004, Lenovo purchased the personal computer business and

the brand “ThinkPad” famous computer IBM in the IT industry all over the world. This

landmark transaction is taken as its most important stage of the international strategy

in the computer industry. This marks the trinity Lenovo's internationalization strategy

has risen to a new stage, which indicates that Lenovo already in the United States

established a brand-name image localization.

Lenovo started in the past three decades with a group of 11 engineers from China. It

was founded in 1984, at the beginning of Lenovo's name is Legend Group Limited,

but it has been converted to Lenovo in 2003. Today, this group expanded their

empire with forward thinking and innovation to more than 160 countries. It's a

consistent company always giving a new look to technology to provide a world of

more exciting and solving global competition. Lenovo is always dedicated to

transforming their customer experience through technology and how they interact

with the world of environment. Lenovo's success in the history of their establishment

was with an increase in profit of $ 43B, besides having hundreds of millions of

customers with an average sales of 4 units of devices for every moment. This task

will discuss the strategic management components implemented by the Lenovo

Group in order to increase sales, besides the authors will also point out the problems

faced by Lenovo while focusing on strategic planning in increasing their sales and

profits.

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2.0 NATURE OF BUSINESS PRACTICE

The Lenovo’s company, born in Asia, has the expertise in the area of the market, but

it also features the ability to adapt to the global marketplace so they are constantly

working to improve their productivity through innovation and increasing their

branches worldwide and compete for international market place. As a well-known

company and brand in the global technology market, Lenovo has consistently strived

to position their brands as world-renowned brands. Lenovo has a well-earned

reputation for delivering superior-quality products and is committed to ensuring that

its products are safe throughout their life cycle. Lenovo relies on the principles of

Product Life Cycle Assessment to ensure that every stage of the product’s life is

taken into consideration, including manufacturing, transportation, installation, use,

services and recycling. This enables Lenovo to gain deep insight into opportunities

for risk and cost minimization as well as insight into new opportunities for enhancing

and increasing product marketability to meet the preferences of an increasingly

informed public.

Corporate strategies, policies and guidelines have been designed to support

Lenovo’s commitment to product safety. Lenovo strives to ensure that our products

meet all applicable legal requirements as well as voluntary safety and ergonomics

practices to which Lenovo subscribes wherever our products are sold. Lenovo’s

global Quality Management System, which has earned ISO 9001 (International

Organization for Standardization) certification, ensures the continual delivery of

design improvements into Lenovo’s current and future products. Lenovo strongly

embraces the ISO 9001 commitment to an effective quality management system,

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and is dedicated to exceeding industry standards for product quality and reliability.

To maintain this quality level, Lenovo employs an active closed-loop process with

various feedback mechanisms. These feedback mechanisms provide quick

resolution of customer issues. When product issues are discovered we perform root

cause analysis and feed the results back into manufacturing, development and test

organizations ensuring that similar issues don’t arise with current or future products.

2.1 Lenovo's working culture

Culture

Lenovo's working culture is also known as their DNA. They call it Lenovo's road

which is a shared and practiced value in their business. It explains how they face

daily commitment, they have a statement that says: "We do what we say and we

own what we do." This culture also drives how they work every day, through what we

call the 5 Ps:

1. PLAN before we pledge

2. PERFORM as we promise

3. PRIORITIZE the company first

4. PRACTICE improving every day

5. PIONEER new ideas

This culture is what has enabled us to consistently raise the bar on delivering

breakthrough innovations, award-winning designs and strong financial performance.

People

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At Lenovo, the people share a common aspiration to be the very best. Whether

serving their customers, working together as a team or contributing to the

community, they are working to build a unique company delivering unparalleled

products created and supported by people who represent a wealth of cultures and

experiences. Our strength lies in this diversity. And every day, on every project, they

are also creating a better place for inclusion and respect for others.

3.0 COMPONENT STRATEGIC MANAGEMENT PROCESS TO IMPROVE SALES

Lenovo companies are constantly working to increase their sales rates in the

industry and continue to compete with the various brands currently in the market.

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Here's an overview of the strategic management components adopted by Lenovo

companies in increasing their profitability and selling rates.

3.1 Environmental scanning

Scanning the environment is a key step in strategic management of a company. It is

basically a process of evaluating and reviewing what is likely to have an impact on

the company and business and how it operates. This step requires managers to

evaluate some of the external and internal factors that affect the business. Certainly

a manager is well aware of what is happening in his company and necessarily the

inside factor is easy to identify. For example, internal factors are about the sale,

profitability and profitability of the company. Whereas for external factors, it requires

more collaboration to identify related problems, a wise manager will place himself in

the top position by easily accessing data and industry information, so that it can

anticipate the factors or the response of the change will override the company at will

come in. Additionally external factors can be scanned through overall economic data,

market targets as well as competitors.

Each of these factors – internal and external – can become part of a thorough SWOT

analysis. This is a strategic review of a company’s strengths, weaknesses,

opportunities and threats. A SWOT analysis helps give a company a more accurate

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snapshot of where it fits into the industry and the economy as a whole and identifies

steps it can take to grow and improve its financial health.

The following is a result of SWOT analysis conducted on Lenovo companies, which

can be divided into two, namely internal analysis such as strengths and weaknesses,

as well as external analysis of opportunities and threats.

Lenovo SWOT analysis

Internal Analysis

Strengths

Lenovo has Strong sales position in the mainland (China) because of 90% of sales

from it. So, as market leader in China, Lenovo is earning more revenue from the

mainland. Lenovo has a considerably strong domestic PC market share. During the

year 2004 and 2005, the market share for PC products reached 27 and 26 percent

respectively, which was more than double of the second vendor, Founder. Technical

innovation made the significant contribution, and also the close relationship with the

Chinese government. Furthermore, it has a strong strategic alliance with suppliers

(IBM). Lenovo has the leading position in the fastest growing market in the world.

Their acquisition of IBM’s PC business makes them the third largest PC supplier in

the world. In addition, the people of ThinkPad® notebooks and Think Centre™

desktops are now part of the Lenovo team—the award-winning engineers, the

manufacturing teams, the sales representatives, the business partners (Lenovo

Company, 2007).

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Lenovo built a network comprising 110 sales zones spanning 18 regions in China,

which allowed Lenovo to meet customer needs more efficiently and to improve its

control of customer information. So, it establishes the customer-oriented sales model

successfully. Lenovo’s customer segmentation strategy ensured it to meet the

demands by modifying its product lines. For instance, the computer series of Tianjiao

is for the high-end consumer market and the series of Yuanmeng is for the poor

consumers at the affordable prices (Lenovo Company, 2007). In addition, Lenovo

has a low production cost and good event sponsoring, so these strengths can help

Lenovo save cost and gain a good publicity.

Weakness

Lenovo is unable to maintain sustained growth rate in all market segments:

i. Lenovo ignore emerging competitors

ii. Retaining of largest share by the competitors Delivery time taking long time

iii. Poor Brand Perception (Global)

iv. No pure Electronic Sales

v. Low inventory Turnover

vi. Limited knowledge of global market

External Analysis

Opportunities

PC sales are expected to grow.

Fast growing international market.

Signing of alliance with the US.

Specialty shops providing one stop platform for distribution.

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 i. Import Barrier Increasing Global Demand Internet Boom

ii. Growing Wireless Pc Market

iii. Government’s Association

Threats

i. Heavy Competition Industry

ii. Reaching Maturity

iii. Software piracy and Clone market

iv. Little firms’ growth

v. Competition Threat From Both Local And International

vi. Market Price War

vii. International Competitors Forming Alliances With The Local Competitors

viii. Threat of Price Competition from Clone PC Makers.

3.2 Strategy Formulation and Implementation

Environmental scanning produces a lot of information. Strategic managers use that

information and data to formulate a strategy that can be implemented company-wide.

A strategic manager develops thoughtful strategies to capitalize on the strengths and

opportunities identified in the SWOT analysis. Ideally, the selected strategies also

either bypass or minimize the importance of the company’s weaknesses and

threats..

By analysis of internal the external environment and study the future development

direction of Lenovo, the data obtained from the SWOT analysis is the basis for

formulating strategies that can be applied to the company. This is not meant to

preserve the Lenovo’s company in the global technology market competition, as well

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as to increase sales revenue. The strategy used by Lenovo companies is to explore

the outsourced markets of Asia in the United States, thereby enhancing the speed of

transmission services, producing computer products by consumer categories, and

also apply changes in organizational structure and working patterns. Lenovo through

its CEO and chairman's statement, Liang said they would be open to the current

changes so as not to miss their field. In addition, the work culture is also enhanced

by practicing an equally equal environment between their worker gender.

Target Marketing Choice of Lenovo At present, Lenovo considers the following

factors when choosing target market: 1) Strong brand awareness, city customers

who have advanced concepts. In the personal computer market, the impact of

Lenovo brand is comparative advantage, so choosing such target customers can

cater to the needs of such customers. 2) Cities customers who have the high level of

education, higher on admission, and are aged below 45. Lenovo called this crowd

high-end crowd, the crowd is conducive to high-end products sales. 3) Developed

rural market, those customers have strong brand awareness. This crowd has formed

part of purchasing power, Moreover, Lenovo early did the act of the "free movies for

countryside" to develop the rural market, the activities have brought the brand

impact, so choosing this part of the crowd as the target customer group, apparently

can quickly enter the rural market.

Market Position of Lenovo Lenovo’s marketing position mainly considers the

following three factors: Take mainly to the high-end, middle and high-end

combination of market positioning methods. Middle and high-end positioning can not

only guarantee the consistency of Lenovo position in the market, also continue the

image and status in consumer's mind, while the computer industry‟ present status

such as the profits decline also decides the only choice for high-end positioning, will

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it be possible to maintain the long-term favorable market competitive position

(Gan,2002). Generally speaking, the high-end products‟ unit profits are 2 -3 times

more than low-end products, in the pressure of the rising cost situation, low-end

products have no guarantee of profits, the profits of enterprises is the key to taking

the high-end route. Low energy is not only the main consumer demand of IT

industries, but also an image of the representatives of high-tech enterprise,

therefore, choosing low energy consumption and market leading-edge technology

positioning will enhance brand image. At present, the service content of Lenovo

brand is mainly limited to the after-sales service in a timely manner, etc. such narrow

positioning can no longer meet the needs of the competitive market situation.

Management master Michael Porter (2003) said, in the 21st century the multinational

companies are unlikely to be manufacturing companies, but the service industry. The

new economy is the services economy; the service is the competitive edge. The

Product Strategy of Lenovo Lenovo’s product strategy is the same as target market

and positioning, mainly embodied as follows: Middle and High End Market

Positioning Take Lenovo’s personal computer as example, the market survey shows

that its refrigerators mainly focus on middle and high end, Lenovo owns 70% market

share in high end products, while the middle end count for 40-50% market share, the

market share of low end product is lower than 10%. Different Competition of Product

Development Through segmenting the market, tapping users‟ unmet demand,

thereby pre-empt competitors to develop completely different products from the

market, exclusive share the cake of segment market. Seen from the introduction of

Lenovo’s products in the past three years, we can see this development idea. In light

of this situation, in 2001 Lenovo introduced the "ThinkPad" machines, which reaches

not only to meet the needs of the users but also share the piece of cake alone.

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According to the Channels and the Difference of Segment Markets, Develop and

Design Targeted Products As for the supermarket channel, Lenovo has designed

relatively low prices of mid-level products, while high-end products on the electrical

chain and retail sales channels. For the rural market, Lenovo designs and develops

products that have relatively simple functions, relatively low prices to meet the needs

of the students market. Price strategy of Lenovo In recent years, the production

capacity of IT enterprises seriously exceeds, and this causes to expand market

share and the price war has become worse. As a large computer manufacturer, of

course, Lenovo is subject to the impact of the price war. However, Lenovo was

demonstrated most vividly in this price war, Lenovo did not reduce price, while the

corporate image enhanced, sales grew and market share expanded, the effective

price strategy has enabled Lenovo to exceed in the economy of excessive capacity.

Based on different levels of consumers, Lenovo developed different prices, by

creating differentiated products to meet different consumer groups, formulating

differential price discrimination. Lenovo domestic market sales operator, Yang (2006)

said, Lenovo's production line is continuity, so prices of their products are also of

continuity, from more than 10,000 Yuan to more than 2000 Yuan.

3.3 Strategy Evaluation

Implementing a smart strategy isn’t sufficient by itself to meet goals. Once the

company’s employees are carrying out the planned actions, the company must also

periodically assess the results of those actions. As part of their process, strategic

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managers identify relevant metrics which are carefully monitored and assessed to

make sure the company is on track to meet its goals. Usually, the evaluation phase

will set out specific, regular reporting periods where managers and team leaders

measure progress. This kind of scheduled approach helps to make sure nothing falls

through the cracks or gets overlooked. The strategy evaluation process is crucial in

strategic management. This is how managers and businesses learn what’s working

and what still needs to be adjusted to achieve the best possible results.

Strategy is based on the long term of a business and is the direction and scope of

the organisation. It aims to achieve advantage in a changing environment through its

configuration of resources and competences (Johnson et al, 2008). Henry (2008)

defined the competitive advantages refers to a company must be competent to

outperform itself from its rivals by creating superior value to its customers and

argues that the competitive strategy is regarded with the basis on how a company

will compete in its selected market.

An environmentally uncertain and always changing challenge demands that

organizations formulate a rigorous and reasonable planning process. This requires

the quest for and evaluating various alternatives through the best strategy

formulation to realize the vision, mission and objectives set. Strategic planning is a

key aspect in setting organizational direction so that all the strategies and services

provided are constantly updated, relevant and meet current aspirations.

For Lenovo companies, implementation of strategic planning needs to be evaluated

to ensure that it is capable of bringing the organization to the desired goals and

objectives. Therefore, for Lenovo Group Chairman, Jiang, after making drastic

changes to meet current challenges, Lenovo's brand performance is on the rise, it is

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reflected by the increase in profitability from increased sales revenue. Additionally,

Lenovo has now revamped their image through quality products and meets the

global market demand, which is among the largest computer manufacturers in Asia.

3.4 Ongoing Communication

Each of the three components of strategic management requires excellent,

consistent communication to make sure the company’s objectives are met. All the

stakeholders in a business must communicate well with each other. Ideally, this

communication should offer each party the opportunity for input. This includes not

only a business’s employees but also relevant external stakeholders as well.

Vendors, industry leaders, customers and even legislators may have an impact on

the planned strategy. If that’s the case, their input should be considered. Lenovo

group ensures that all stakeholders can access and reach information and data

relevant to the current state of the company. Nowadays, the rapid communication

technology through the internet allows all stakeholders to communicate with each

other regardless of time and place, since the existence of the internet has provided

space for communication through the world without boundaries. In addition, the

importance of communication also not only facilitates stakeholders and superior

parties, but also includes their employees, and vendors, as well as their customers

and legal entities. Lenovo also committed to safeguarding our shareholders’

interests. Shareholders are provided sufficient notices of the Company’s annual

general meetings and are encouraged to attend and to actively participate in such

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meetings. All resolutions at the general meetings are conducted by way of poll

voting. Lenovo has also established an investor relations team to promote open,

transparent, efficient and consistent communications with shareholders, investors

and equity analysts. The team commits to proactively providing the investment

community all necessary information, data and services in a timely manner, in order

to promote a solid understanding of the Company’s strategy, operations and new

developments. During the fiscal year 2014/15, the Company’s senior management

team presented its annual and quarterly earnings results through webcasts and

physical meetings to communicate with shareholders, investors and analysts.

Through various investor relations activities such as analyst briefings, conference

calls and global investor roadshows, the senior management team presented and

communicated with investors and analysts on the Company’s strategy and

developments.

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4.0 HOW CEO FOCUS ON THE LEVEL OF STRATEGIC TO MAKING IMPROVE

THE SALES.

The Chairman and CEO leads the Board in the determination of its strategy and in

the achievement of its objectives, and ensures that all directors are properly briefed

on issues arising at Board meetings and receive adequate, complete and reliable

information in a timely manner. The CEO has delegated authority of the Board to

take direct charge of the Group on a day-to-day basis. Both the Chairman and CEO

positions are currently held by Mr. Yang. The Board believes that the current

governance structure, with a combined Chairman and CEO, the appointment of a

Lead Independent Director and a vast majority of independent non-executive

directors, provides an effective balance of power and authority for the management

of the Company in the best interests of the Company at its present stage.

As Lenovo expands globally, they are establishing even deeper roots in each major

market, investing not only in sales and distribution, but also in local domestic

manufacturing, R&D and other high-value functions. With its innovation partners,

Lenovo has built the industry’s most resilient, speedy and efficient global supply

chain it provides significant time-to-market and time-to volume benefits, enabling

Lenovo to efficiently drive innovation and sharpen product differentiation as a

significant and sustainable source of competitive advantage. Lenovo leaders are

responsible for establishing objectives and using measurements to drive continual

improvement in quality and customer satisfaction. All Lenovo employees are

expected to contribute to this continual improvement as an integral part of our quality

management system.

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Mr.Yang Yuanqing, Chairman and CEO of Lenovo Group, has implemented a

strategic plan to bring Lenovo to a better position, according to her efforts to

transform the organizations and services offered by Lenovo have succeeded in

delivering lucrative revenue to their sales. Practicing openness towards ever-

changing technology requires them to make changes and improvements to products

and services in tandem with the rapid development of information and

communications technology. In addition, a strategic step is to increase their service

speed in line with global needs. Collaboration and integration are also being

implemented to ensure Lenovo's brand continues to be relevant in the technology

industry market.

As evidence of the implementation of strategic planning to increase Lenovo's sales,

The PC maker said on Thursday that its net profit rose to $77 million for the three

months ended in June, after posting a loss of $72 million during the same period a

year earlier. Analysts polled by Thomson Reuters I/B/E/S had expected the

company’s earnings to come in at $59.4 million. The turnaround was attributed to its

double-digit growth in revenue. The PC maker said sales in the first quarter jumped

19% to reach $11.9 billion. Lenovo has passed the turning point and entered a

phase of ‘acceleration’ - accelerating the execution of our transformation strategy

and accelerating the rising momentum in business performance

4.1 Globalization Strategy

Among Lenovo's key strategies to expand their market coverage is by using a

globalization strategy, Slow and steady no longer wins the race. Globalization

teaches Lenovo to embrace risk and leave a lumbering legacy behind. To go global

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Lenovo, the leading PC manufacturer in China took various steps like: Lenovo is

sponsoring the 2008 Olympic Games; Lenovo acquired IBM's PC unit; Lenovo

changed its corporate name from Legend to Lenovo. After Lenovo purchased IBM's

PC business, because of IBM's personal computer business, it has become a new

leader in the global PC market. Although the company becomes more competitive

and globalized, it still faces lots of threats and risks (Lenovo Company, 2007).

4.2 Brand Strategy

In the early decade, there are many consumers trust the brand of IBM not Lenovo.

Today, Lenovo has built its very strong reputation in the market that its products as

same quality as the origin IBM or even better. As THINKPAD serves as the high end

product for its quality and performance, Lenovo has made use the THINKPAD as the

“bridge” to increase the brand value of Lenovo in the international market. The very

impressive internationalisation strategy by made use of the Olympic game in Year

2008 as co-sponsor while releasing its latest & high quality products has successfully

burst the strong brand name of Lenovo to the world. However, its local brand

strategy is different.

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5.0 PROBLEM FACED BY CEO WHENEVER FOCUS ON STRATEGIC PLANNING

TO IMPROVE THE SALES

In line with Lenovo's vision focused on building not just one of the world's leading

technology companies, but also one of the most admired global companies. Surely

the CEO will face various challenges and problems to achieve the company's vision

and objectives. Among the problems faced is the management of human resources,

which is to achieve the company's goals and objectives, human capital should be

systematically managed and understood of their needs and make them the human

capital with the ability and willingness to carry out all strategic plans that have been

set by the parties boss. For example Yang believed that he would benefit from

exposure to American business practices but Liu persuaded him to delay his plans

for two years. Problems at Lenovo due to lower import duties on personal computers

did not allow for this though. That decided on Lenovo implementing specific job

descriptions with clear responsibilities and a system of performance evaluations

used to determine annual bonuses. At the time, most Chinese enterprises distributed

bonuses of equal size to all employees, there was little sense of responsibility, and

workers passively waited for superiors to issue instructions. When Yang took over

Lenovo's personal computer division, he strongly discouraged the use of formal titles

and required staff to address each other by their given names. Which even required

managers to stand outside their offices each morning to greet their employees while

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carrying signs with their first names. Yang's division moved to a new building in

1997. He used the move to break Lenovo's cultural links to the past. He insisted on a

more formal dress code and training all employees in telephone etiquette; Who

wanted his people to think and act like high-tech workers in developed markets.

After addressing human resources issues, Yang moved on to distribution. Due to

China's large territory, large population, varying degrees of economic development,

and widely different local regulations, Lenovo was having difficulty operating

nationwide. While Lenovo had been using direct sales and a network of distributors,

Yang gave up on direct sales in favor of exclusively using independent agents to

avoid the costs of administering a complex sales network. This action resulted in

Lenovo cutting its sales staff from over 100 to just 18 in 1994. To gain confidence

among distributors, Lenovo provided a wide range of products, offered reasonable

prices, and closely supervised the marketing of its products to look out for the

interests of distributors. In contrast to Lenovo, foreign firms often tried to squeeze

distributors' margins. Which ensured proper training of distributors and brought in

Microsoft and Intel to help with these efforts. Which also sets up a system to monitor

the sales, inventory, cash flow, compliance, and pricing of distributors.

In addition to implementing a globalization strategy, there are many aspects that

Yang need to face, including aspects of English proficiency, that is when he decides

to have IBM and enter the US market, therefore the language and culture mastery

needs to be addressed. Among the steps taken by CEO to overcome this problem,

he relocated his family to Morrisville to improve his language skills and soak up

American culture. Who also hired a private tutor and watched cable news to practice.

Which also sent many Lenovo executives to the US for long postings. One American

Lenovo executive interviewed by The Economist praised Yang for his efforts to make

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Lenovo a friendly place for foreigners to work. As of 2013, Lenovo's top 14

executives come from seven countries. Lenovo has acquired companies all over the

world. The company has dual headquarters in Beijing and Morrisville, the former

home of IBM's personal computer business.

While for brand strategy, Lenovo has previously faced a poor perception of

consumers one day, especially consumers from western countries like consumers in

the United States and San Francisso, this is related to cultural and communication

issues, western societies are not easy to accept the mastery of certain areas in the

field the economy of their country apart from the control of their own people. Hence

this challenge is also relevant because no Chinese company has ever built a global

brand in the western world. In addition to other issues related to the Lenovo brand is

a product quality aspect which has long been said that the Chinese products have

quality problems, this is a serious issue when Lenovo is releasing their smartphones

to the market to compete with other smart phone brands , though they were able to

offer lower market prices, but Lenovo's quality and durability aspects of the Lenovo

smartphone were further disputed and ultimately gave them a bad perception.

Therefore, in line with market demand in the field of information technology

challenges and problems can be overcome through Lenovo's openness to receive

criticism and courage to explore new markets in information technology, Lenovo now

has a better image by focusing on the production of computers, hardware and

related software through strategic cooperation implemented.

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