Lenovo (China) Ltd - Consumer Electronics
- China
Lenovo (china) Ltd
Strategic Direction
·
The company will keep its
position as the leader in PCs within China, and its global presence will also
continue to maintain strong growth. Its step-by-step strategy will focus on
expanding its outlets and networks across China during the forecast period.
Lenovo will continue to increase the number and size of its solution centres in
mainland China, which concentrate mainly on technical support and consultancy
services.
·
With global retail distribution
channels, the company aims to become a leader in the IT industry. With R&D
facilities at Yamato, Japan, manufacturing plant at Raleigh, North Carolina,
and sales headquarters throughout the world, Lenovo is poised to make a grand
entrance onto the world stage. Meanwhile the company will continue to launch
low-cost laptops to compete with domestic brands within China and gain more
market share in the low-end segment.
·
As the current economic
challenges affect the customers and suppliers of the entire industry, the
company is trying to move quickly and decisively to manage its business during
this difficult period. The company will reduce its management costs and may
reduce its staff in the future.
Key Facts
|
Full name
of company:
|
Lenovo
(China) Ltd
|
|
Address:
|
6 Chuangye
Road, Shangdi, Haidian District, Beijing
|
|
Tel:
|
+86 10 5886
8888
|
|
Fax:
|
+86 10 5886
8876
|
|
www:
|
http://www.lenovo.com.cn
|
|
Activities:
|
Computers,
portable computers, mobile phones, storage drives, IT services, etc.
|
Source: Euromonitor International from
company reports, trade press
|
|
2005
|
2006
|
2007
|
|
Net sales
(RMB billion)
|
69.3
|
74.1
|
112.7
|
|
Net profit
(RMB billion)
|
6.8
|
7.2
|
10.3
|
|
Number of
employees
|
n/a
|
23,200
|
25,120
|
Source: Trade press, company research
Company Background
·
35.2% of Lenovo was owned by
public shareholders, 46.9% by Legend Holdings Limited, and 19.9% by IBM. The
Chinese Academy of Sciences, a government agency, owns 65% of Legend Holdings
in turn, so in effect the Chinese government owns about 30.5% of Lenovo and is
the largest shareholder in the company.
·
Lenovo is also China’s top PC
manufacturer, which makes it an obvious choice to represent China as an Olympic
sponsor. It has been China’s delegate for the 2006 Winter Games in Turin as
well as for the Beijing Games in summer 2008. Boasting a client list that
includes Chinese government offices, top Chinese companies, and the US
organisations NBC and NFL, among others, Lenovo seems intent on maintaining and
building its business through an ability to supply high-quality customised
products for the mass market with a relatively short turnround time.
·
Lenovo has located its
management headquarters in the US and its global marketing centre in India,
although its manufacturing base remains in China. Lenovo operates from
facilities in Beijing, Raleigh (North Carolina), Singapore and Paris, and it
has research centres in Japan, China, and the US. Through Legend Holdings, it
has a good process and business methods after allocating these resources. As
well as technological innovation, the competitiveness of a global company
relies to a large extent on innovative business methods.
·
Lenovo is present in the IT
industry, where its products include desktop and notebook PCs, workstations,
servers, storage drives and IT services. It also offers IT management software
under the ThinkVantage name. Lenovo produces desktops, laptops, servers,
hand-held computers, imaging equipment and mobile phone handsets. Lenovo also
provides information technology integration and support services, and its QDI
unit offers contract manufacturing. Lenovo also offers Internet access.
·
In order to maintain its
profile among small and medium-sized enterprises and individual consumers, the
development of its brand is especially important to Lenovo. It should promote
the brand by using innovative and high-quality products, and it should also put
a great deal of money into brand publicity.
·
Lenovo has both national and
regional distribution networks, and it has made efforts to expand into the
small and medium-sized enterprise markets, and to develop the overseas small
enterprise market by leveraging on double business mode. As an international
enterprise Lenovo had its global marketing centre in India.
·
Lenovo has been actively
sponsoring world sporting events in recent years. In 2004, Lenovo sponsored the
Williams F1 Formula One team and in 2007 it sponsored the National Basketball
Association (NBA). In 2006 Lenovo used the Brazilian soccer star Ronaldinho
Pummy to promote its new products. The company was also chosen to design the
torch for the 2008 Beijing Olympics. The curly design on the torch is based on
a traditional Chinese representation of clouds. It is clearly based on
symbolism and also appears to have been inspired by the shape of a traditional
Chinese scroll.
Production
·
Most Lenovo products are made
within China, and the company does not sell imported products. Based in the
Chinese domestic market, Lenovo won its initial success by competing with the
established foreign players and promoting the development of a national IT industry.
It has introduced the ThinkPad R61 and T61 notebook PCs, which are the first
notebooks to use the new Santa Rosa platform from Intel. Lenovo has
successfully completed a reform of its corporate ownership by transforming
itself from a state-owned enterprise into a corporation with a modern corporate
governance structure.
·
Lenovo also has manufacturing
facilities in Beijing, Huiyang, Shanghai and Shenzhen (all in China) and
Pondicherry (in India). Lenovo exports its products world-wide. Lenovo has
previously sold servers in China under the SureServer brand, but it is now
breaking out of its home market for the first time.
·
The company has become the
biggest domestic manufacturer of PCs and distributor of third-party products
through its wholesale business. It does not produce stock for other
manufacturers. Lenovo expects that its laptop sales, excluding those of
Thinkpad, will grow by 60% as young students choose their models. Lenovo’s
laptops will be welcomed by the market with functions including a high-definition
video player, a large hard disk (250 GB) and facial recognition.
·
Lenovo Group Ltd will launch
its first ultra-mobile personal computer (UMPC) in August 2009 to compete with
Asus and Hewlett-Packard in the small PC market. Lenovo’s new UMPC models, called
S9 and S10 (with 9- and 10-inch screens), are expected to sell at prices in the
rage of RMB 2,999–3,999. Unlike Asus’s first-generation EeePC, which features
small-capacity solid-state hard disks, Lenovo’s UMPCs feature a hard disk with
a 120 gigabyte capacity and a Windows XP operating system.
·
Among the new technologies
utilised by the IdeaCentre K210 is the VeriFace TM3 facial recognition
technology that allows the user to log in by having the camera recognise
his/her facial image. The K210 is the only desktop PC that offers this
distinctive feature, and it also features an anti-microbial keyboard that uses
special material to inhibit bacterial growth. This is especially helpful for
families in which many people use the same keyboard and are concerned with
“keyboard germs”.
·
Lenovo is introducing the
ThinkPad R61 and T61 notebook PCs. Lenovo has announced that it will begin
selling laptops to business and private customers with preinstalled Linux.
|
Location
|
Brand
|
Annual
production
|
|
Beijing
|
Lenovo
|
> 29.7
million units
|
|
Beijing
|
IBM
|
> 10.3
million units
|
Sources: Trade press, company research, trade
interviews
Competitive Positioning
·
The company’s core business
ranges from computers to IT services, it leads the market in laptops and
desktops, and it markets a narrow product portfolio. Lenovo retreated from the
digital cameras sector, since it found it hard to compete with Japanese brands
even in the domestic market.
·
Lenovo’s products have focused
on both the middle market and the high end. Lenovo prodicts are targeted on the
mid-range market while laptops made under the IBM brand are premium productss.
In other markets for consumer electronics products, such as mobile phones, the
company has focused more on the low end.
·
The company is leading the
market in both laptops and desktops, with respective shares of 35.3% and 27.2%
in 2007, which is all the more remarkable since the competition in China is
relatively fierce. The company’s market share in laptops increased since its
prices are very competitive and the design of Lenovo branded laptops is similar
to that of laptops produced under the IBM brand. Its market share in desktops
is declining, however, since consumers have many options when buying desktops
while Lenovo cannot offer any overwhelming advantages in this sector.
·
The company is typically a
leader in innovation in the laptops market, and it has very strong R&D
teams both in China and overseas. The group has research centres in Yamato (in
Japan), in Beijing, Shanghai and Shenzhen (in China), and in Raleigh, North
Carolina. The company has spent a lot money on new product development, and
many other players are following Lenovo’s lead.
·
The company is interested in
leading the market in computers, and it is making efforts to enlarge its
distribution network and presence within China through cooperation with a range
of local dealers that it formerly regarded as its profit eaters.
·
The group’s performance was
driven by strong growth in sales of notebook computers to both consumer and
small enterprise segments. As the disposable incomes of domestic consumers have
increased, the company has positioned itself in the fastest-growth and more
mature market segments.
|
Product
type
|
Volume
share (%)
|
Rank
|
|
Desktops
|
27.2
|
1
|
|
Digital
cameras
|
3.2
|
9
|
|
Mobile
phones
|
1.9
|
7
|
|
Laptops
|
35.3
|
1
|
Source: Euromonitor International
