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North South University Course- Strategic Management (MGT489) Section- 06, Summer 2017

Strategic Planning for LENOVO Submitted To, Md. Hannan Miah (MHM) Senior Lecturer, Department of Management, North South University. Submitted By, Group No. 2        

Joly Yasmin Lina Md Niaz Hassan Tousifur Rahaman Anik Rakin Muhtadee Shihab Md. Nashif Shahriar Rakin Md. Mahmudul Haque Mohammad Ibrahim Patwary Farhedul Islam Tuhin

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Executive Summary

This report highlights Lenovo‟s ins and outs of the recent years. Lenovo is currently one of the biggest technological company in the world. In our report we focused on the current market trend to set strategies for Lenovo. We discussed the problems they are facing in the industry and also the strategies currently adopting by them. This report represents the strategies it can adopt from year 2017-2022. We recommended the corporate level, business level, functional level and technological level strategies they can use for the betterment of the company. Also in the report we described how they can implement those strategies successfully to become the number one technology company in the world.

Table of Contents Executive Summary....................................................................................................................................... 1 History, Development, and Growth of Lenovo ............................................................................................. 5 Lenovo's Internal Environment, Resources, and Capabilities....................................................................... 5 Resources .................................................................................................................................................. 6 Tangible ................................................................................................................................................. 6 Intangible .............................................................................................................................................. 6 Capabilities................................................................................................................................................ 6 Organizational Culture .......................................................................................................................... 6 Organizational Structure ....................................................................................................................... 6 Recruiting Process ................................................................................................................................. 7 Controlling Process ............................................................................................................................... 7 Industry Analysis ........................................................................................................................................... 7 The industry Lenovo Belongs to................................................................................................................ 7 Competitive Forces Analysis ..................................................................................................................... 7 Threat of new entrants ......................................................................................................................... 7 Bargaining Power of Suppliers .............................................................................................................. 7 Bargaining Power of Buyers .................................................................................................................. 7 Rivalry among Existing Firms ................................................................................................................ 8 Threat of substitute and complements ................................................................................................ 8 Industry Life Cycle Analysis ....................................................................................................................... 8 Macro Environment Analysis .................................................................................................................... 8 Political .................................................................................................................................................. 8 Economical ............................................................................................................................................ 9 Social ..................................................................................................................................................... 9 Technological ........................................................................................................................................ 9 Environmental ..................................................................................................................................... 10 Legal .................................................................................................................................................... 10 SWOT Analysis.............................................................................................................................................10 Strength ..................................................................................................................................................10 Weakness ................................................................................................................................................ 11 Opportunities .......................................................................................................................................... 11 Threats .................................................................................................................................................... 11

Lenovo's Business ....................................................................................................................................... 12 Mission .................................................................................................................................................... 12 Personal Computers............................................................................................................................ 12 Convergence ....................................................................................................................................... 12 Culture................................................................................................................................................. 12 Vision of Lenovo...................................................................................................................................... 12 Lenovo's Distinctive Competencies ............................................................................................................ 13 Advantages from the Resources ............................................................................................................. 13 Advantages from the Capabilities ........................................................................................................... 13 Competitor Analysis .................................................................................................................................... 14 Brand Image, Brand Identity and Brand Integrity of the competitors.................................................... 15 Financial Analysis ........................................................................................................................................ 15 Current ratio ...........................................................................................................................................15 Net Profit................................................................................................................................................. 16 Return on investment capital .................................................................................................................16 Debt to equity ......................................................................................................................................... 17 Value Chain Analysis ................................................................................................................................... 17 Primary Activities .................................................................................................................................... 17 Research and Development ................................................................................................................ 17 Production........................................................................................................................................... 18 Marketing and Sales............................................................................................................................ 18 After Sales service ............................................................................................................................... 18 Support Activities.................................................................................................................................... 19 Infrastructure ...................................................................................................................................... 19 Human Resource Management .......................................................................................................... 19 Materials Management ......................................................................................................................19 Technology .......................................................................................................................................... 20 Lenovo's Competitive Advantages .............................................................................................................. 20 Business Model ........................................................................................................................................... 21 Recommendations to improve profitability ................................................................................................ 23 Taking advantage from Strength and opportunities ................................................................................ 24 Overcoming weaknesses and threats....................................................................................................... 25 Corporate Strategies for Lenovo (2017-2022) ............................................................................................ 25

Business Level Strategy (2017-2022) ......................................................................................................... 27 Mass Differentiation ............................................................................................................................... 28 Generic Business level Strategy .............................................................................................................. 28 Functional level strategy (2017–2022) .......................................................................................................29 Research & Development Sector ............................................................................................................ 29 Production Department .......................................................................................................................... 29 Supply Chain Management ..................................................................................................................... 30 Human Resource Management .............................................................................................................. 30 Organizational Culture and Motivation .................................................................................................. 30 Marketing & Sales Department .............................................................................................................. 31 Customer Relationship Management ..................................................................................................... 31 Lenovo’s technological strategies (2017-2022) .......................................................................................... 31 Well integrated information technology ................................................................................................ 31 Manual for Service .................................................................................................................................. 32 Information Management System for Distributors ................................................................................ 32 Format War ............................................................................................................................................. 32 Revised Business Model .............................................................................................................................. 33 The company’s governance to support strategies...................................................................................... 34 Recommend a strategic .............................................................................................................................. 34 The existing company culture ..................................................................................................................... 34 Recommend Global Strategies.................................................................................................................... 35 Entry mode.............................................................................................................................................. 35 Ethical value proposition ............................................................................................................................36 Lenovo’s value proposition ..................................................................................................................... 36 Bibliography ................................................................................................................................................ 38

History, Development, and Growth of Lenovo Under the name of Legend Group Lenovo first established their business in 1984. Its Chairman Li Chuanzhi started the business New Technology Developer Inc. with 10 other business partner. In 2003 Lenovo was launched under the brand Legend for further expansion. In the year 2004, Lenovo acquired IBM‟s personal computer division by an agreement(Wang, Chu, Chen, & Kuo, 2005). Levono sponsored 2006 Winter Olympic which was held at Torino in Italy by giving 350servers, 1000 notebooks and 5000pcs desktop. This business is a multinational personal technological company worth of $39 billion serving in more than 160 countries. They are one of the largest PC Company(Lin, Manolis, Srinivasan, Sun, & Yang, 2008). They are committed to build exceptional and coordinate PCs, mobile, internet devices, laptops, tablets etc. Product innovation, strong global supply chain and effective strategy is their foundation. Its product lines included Thinkpad for premium performance, Ideapad for diverse style and signature performance ,and Yoga with awesome models. They also produce tablets smartphones, server workstations and mobile internet devices. Today, becoming the market leader in a global scale is Lenovo‟s target(Dozier, 2015).

Lenovo's Internal Environment, Resources, and Capabilities The Internal Environment of Lenovo is supportive to innovation in every sector. To encourage creativity and problem solving, is they follow a geocentric approach worldwide.

Resources Tangible a) Financial Strength: Lenovo has a strong financial plot. From 2010 to 2015 they had consistency in profit margin growth .But in 2016 they it fall a bit. (Lenovo, Annual Report, 2015-2016) b) Physical Resources: Lenovo Group has several regional headquarters and corporate offices all over the world and also service center. c) Human Resource: Lenovo has a huge number of skilled human work force in their manufacture division, distribution channels, Service centers and Corporate headquarter Intangible Brand Reputation: Lenovo has a strong brand name and well reputed market position in this industry.

Capabilities Organizational Culture The organizational culture in Lenovo is encouraging to innovation and youthful entrepreneurships. (Bao, 2016) Organizational Structure The structure is flat and employees can share their ideas with the department heads and also has the lowest management cost in the industry.(Xi & White, 2004)

Recruiting Process Lenovo always try to hire people of who are creative and work in implication of new ideas and can cope up with the trend. (Liu, 2005) Controlling Process Lenovo follows a geocentric way of management and this helps them to work in better way and get rid of cultural problems. (Gao, 2015)

Industry Analysis The industry Lenovo Belongs to Lenovo is in the Computer Hardware and Electronics industry as they are making personal computers, laptops, PC accessories, and mobile phones.

Competitive Forces Analysis Threat of new entrants: It is very low in the personal computer industry as the industry is in the maturity and any new comer will have to spend so much on R&D and employment that the products will have a very high price. (Rothaermel, 2014). Bargaining Power of Suppliers: Suppliers of PC industry are categorized in hardware supplier, software supplier and service suppliers, so the firms can easily switch between the suppliers. So, the bargaining power of the suppliers is average (Dobbs, 2014). Bargaining Power of Buyers: As the customers have more options to look for, the bargaining power buyers possess in this industry is really high.

Rivalry among Existing Firms: The top manufacturers have competition in producing at a low cost with best quality. Firms may compete in terms of innovation, distribution channel or services, but price competition is relatively high, and it will remain the same in future as well. So, the threat to industry rivalry is high. Threat of substitute and complements: It may be difficult for new entrants to affect but for the substitute products, it is very easy, as products like Smartphone, Tablet etc are more flexible and also contains most of the necessary features. So in future it can happen that either these two industries may merge together or drastically affect each other. Forecast says about 87% sales in 2017 will be of smart phones and tablets. So threats of substitutes in this industry is strong. (www.guardian.com, 2017).

Industry Life Cycle Analysis The Computer Hardware industry is now in a maturity stage as the growth has stopped, firms working in this sectors have a certain amount of market share, everyone is trying to differentiate through pricing, the competition is really high, to get more market share one has to take market share of some other company. Lenovo started its journey on 1984 in Beijing, later it incorporated in Hong Kong in 1988.In 2005 Lenovo bought the IBM‟s personal computer business. Soon Lenovo introduced their laptop in the market. So Lenovo is at the maturity from 2008 and still its holding its high position. (History, 2013)

Macro Environment Analysis Political Lenovo has its operations and manufacturing plant in several countries and its operations and manufacturing plants are affected by those countries' political situation. Recently Lenovo

computers faced some difficulties in China. They are accused to spying on government officials.(Nash, 2016). On the other hand, they have also got political advantages in India as Tamil Nadu laptop schemes helped Lenovo to become number 1...