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Can Lenovo Regain Glory with New Strategy?

Can Lenovo Regain Glory with New Strategy?
Case Code: BSTR540
Case Length: 21 Pages
Period: 1984 - 2018
Pub Date: 2018
Teaching Note: Available
Price: Rs.500
Organization: Lenovo Group Limited
Industry: Computers, Smartphones
Countries: China, Global
Themes: Growth Strategy, Business Model Innovation, Blue Ocean Strategy
Can Lenovo Regain Glory with New Strategy?
Abstract Case Intro 1 Case Intro 2 Excerpts

Excerpts

Becoming the PC Market Leader in China

In the 1990s, Lenovo was the first company to introduce the home computer concept in China and it grew into a national company cornering a market share of 27% in the domestic market. Lenovo’s competency was its deep understanding of the domestic market and its quick response to the demands of local consumers. The success of Lenovo and other domestic computer makers in China confounded the predictions made by several market analysts. According to BusinessWeek , “It wasn’t supposed to happen this way. A few years ago, most analysts were convinced that the global players would gobble up the Chinese market, with locals like Lenovo stuck in second tier status – at best.” ...

Lenovo's Internationalization Strategies

Lenovo believed that to become a global brand, it was not enough just to be identified as a global firm. Establishing a presence in more developed and highly globalized markets such as the US and Europe was essential for its overall strategy. By 2001, though Lenovo’s market share had reached 30% in China, it realized that it would not be able to grow much more given the stiff competition in the country. In addition to this, the domestic market for home PCs was shifting toward laptops rather than desktop PCs. This posed a challenge to Lenovo despite its recording profits of US$ 130 million for the FY 2002-2003, as laptops were not just costly to manufacture but also involved tough competition from rivals such as Dell and HP. In a bid to combat these challenges the company decided to step into international markets...

Protect and Attack Strategy

The global economic slowdown in mid-2008 led to Lenovo posting a loss of US$ 226 million. During this time, the company’s CEO William Amelio stepped down in favor of Yang, while Liu returned to assume the role of Chairman....

Other International Acquisitions

Lenovo’s Protect and Attack strategy helped the company taste success in China as well as in other global markets. For the FY ended 2013, the company also emerged as the number one PC company in global emerging markets, as well as three of the seven largest PC markets in the world – China, Japan, and Germany. For the quarter ended June 30, 2013, Lenovo’s smartphone business....

Losing Momentum?

With the acquisition of Motorola, Lenovo had ambitious plans to capture a portion of the pie in the global smartphone market. However, the company’s fortunes declined when its smartphone shipments decreased by 53% in China with Lenovo maintaining a meager 3% market share for the Q4 of 2015, according to Canalys. In the global market for smartphones, the company stood at fifth position with a market share of 5.7%...

Tackling Challenges

In a bid to arrest the decline in sales in its smartphone market, Lenovo planned to focus on its Moto brand. According to Yang, “Singular branding will benefit the business.” Stating that the new strategy might not bring in much success to Lenovo, Steven Tseng, an analyst at Daiwa Capital Markets, said, “Customers are also really confused by the company’s strategy.” ...

The Road Ahead

Despite the challenging outlook in the global smartphone market, Yang remained optimistic about turning around Lenovo’s struggling mobile business. He stated that there was a US$ 110 million sequential improvement in operational pretax income, attributable to improvements in the mobile and data center businesses in the quarter ended June 30, 2017. Yang added, “Not only did this gave me more confidence we will turn around our mobile business in the second half of FY2018, I think the entire Lenovo is entering a new phase of growth.” ...

Exhibits

Exhibit I: Early History of the Chinese PC Industry
Exhibit II: Brand Top 10 Chinese Global Brand Builders 2017
Exhibit III: Lenovo’s Key Financials
Exhibit IV: Lenovo’s Ambitions under Protect and Attack Strategy
Exhibit V: Protect and Attack Strategy (FY 13/14)
Exhibit VI: Market Share of Vendors in the Global PC Market

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