Essay on Lenovo – technology company

(Part 2)

 

As a result of these other acquisitions and strategic decisions, Lenovo has become one the most important and interesting technological companies in the world.

Finance

Lenovo (2012)

 

As we can see in the table, the development of the revenues in the past six years had been con-tinually increasing, as a result of all the good strategy, and acquisitions Lenovo had made.

Another important fact is that they hadn’t lost the focus of their main core business, they maintain they strong performance in PC business in China and the other countries, but also they have reached some share in the mobile sector in the emerging markets, which had a positive influence in the revenues of the company.

 

Business portfolio

 

Although Lenovo has a relatively small business portfolio compared with its counterparts such as Microsoft, the company is slowly increasing its portfolio and expanding its many services. In addi-tion to the company’s purchase of IBM’s personal computer business, in 2014, Lenovo also ac-quired IBM’s server business for $2.3 billion (CBC News). Furthermore, Lenovo has been slowly increasing its smartphone business through many purchases; for example, the company recently purchased Motorola Mobility from Google for $2.91 billion (Gilbert 2014). Today, after the compa-ny’s many acquisitions, the company’s overall portfolio consists of smartphones, notebooks, desk-top servers, printers, television and many other electronic products.

 

Market position

 

Due to its increase in the business portfolio, Lenovo’s market position has been slowly improving over time since the company first launched. One of the reasons for the increase in their current market share has been due to their acquisitions. In the fiscal year ended 2013, the company rec-orded their highest ever earnings of $205 M USD in the personal computer market (Lenovo 2013a). Furthermore, the company had a market share of 15.9% in the PC industry (Lenovo 2013a) Overall, the company is the 3rd largest company in the world today in the smart connected devices (PCs, tablets, and smartphones) market, behind Samsung and Apple, but ahead of HP and Sony. With the continued acquisitions this year as well as a growing partnership with IBM, the company is expected to further increase its market position in the future.

 

Amount of employees

 

Since launching in 1984, Lenovo has been growing very rapidly and increasing their staff as a re-sult. By the end of 2012, the total number of employees was 27,000. The current CEO is Yang Yuanqing. He has been the CEO of the company since 2003 (Gilbert 2014). He started off in the company on the sales team and was soon promoted within the company. When the previous CEO retired in 2003, Yuanqing was given the position of the current CEO of the company (Gilbert 2014). Under his direction, the company has experienced many acquisitions and seen tremendous growth.

 

Innovation strategy
Expansion of the portfolio

 

Lenovo originally expanded their portfolio in Asia (China) and America then went to take over the rest of world, especially in the EMEA market (Europe, Middle East and Africa) and the Pacific Asia market (Business Wire 2014). They expanded their portfolio through mergers and acquisitions of companies such as:

– 2011: purchased NEC informatics division to create the biggest company in Asia and East
– 2012: Lenovo acquired CCE (to grow PC market in Brazil)
– 2014: Lenovo bought IBM’s server business for 1,690 million И.
– 2014: Acquired Motorola Mobility from Google for 2,910 million И.

 

Lenovo – targets new markets or mature markets

 

Lenovo is focusing on mature markets, adding new characteristics, performances and uses to the PC. Lenovo is a fabricator of computers, tablets and mobile and also provides technologies about integration info. Actually, Lenovo purchased Motorola, a mobile company, this is related with com-puter market as a technological field, and this will do some synergies each other (Tilves, 2014).

 

Targeted costumers

 

Lenovo services customers with common requirements and who need lesser customization. In other words the targets are small to mid-sized companies and individual customers.

 

Incremental or radical innovations

 

Lenovo’s main strategy has been incremental innovation as opposed to radical. An example is that they are focusing more on their product instead of corporate brand. Lenovo works on product inno-vation rather than Lenovo brand; for example in their advertisements for the ThinkPad and the Yo-ga products, they are more focused on product features instead of their brand name. And they add some technical innovation in every product increasing the performance and qualities substantially.

 

Competitiveness of the market

 

In this graphic below we can realize how competitive the market is. Lenovo is the leader company in the whole pc industry (with 16% market share). Lenovo did a great job taking market share from other companies such as HP and Dell (Lenovo 2014a).

Another example is that in July 2013, Lenovo ousts Hewlett-Packard as the world leader in com-puters. To reach this, Lenovo is buying or acquires some participation in others brands as we said before.

 

Development of dominant design

 

We can say that Lenovo is mostly the follower in some aspects like tablets, computers and mobiles, but in the other hand is also the innovator in other fields. For example:

– In 2006: Lenovo Unveils First ThinkPad laptops dual core, which improve productivity and in-crease the battery life to 11 hours.
– In 2010 Lenovo start the production of his first computer ‘all in one ‘called AIO C300.
– In 2011 sell 3 types of tablets: 1.IdeaPad K1 with Android 3.1, 2.IdeaPad P1 con Windows 7 3.ThinkPad con Android 3.1.

The rough competition within the global technology industry is something every corporation has to deal with. Innovation, not tradition, is the key to success and as customers continuously ask for the latest, the newest and the hottest products, companies are forced to keep up with the pace. The process of innovation is a never-ending challenge and only the strongest innovators succeed (BTS 2014). Our aim in this section is to explain the role of innovation and describe the crucial steps of Lenovo’s innovation process.

In 2005, Lenovo acquired IBM’s PC business. This rather confident move, a $3 billion company buying a $10 billion company, made Lenovo a household name outside of China (Kirkland and Orr 2013). Rui and Yip (2008) state that the main strategic reasons of the purchase were to gain quick access to foreign markets and niche technology. Furthermore, Sun (2012) defends that the com-pany’s rapid success is related to the mergers and acquisitions that have helped in terms of inno-vation resources and also increased the development team to more than 2000 people. Until this day, Lenovo is constantly entering new markets: Brazil, India and Russia have all been recently targeted by the company (Kirkland and Orr 2013). However, even though these markets are new to Lenovo, other technological companies have established business activities there since many years. Our belief is that Lenovo hasn’t adopted a pioneer entry strategy but tries to profit from ad-vantages such as a lower market uncertainty and spill-over effects.

However, M&A isn’t the only way in which Lenovo works with innovation. In an interview with the McKinsey Quarterly (Kirkland and Orr 2013), the Lenovo CEO Yang Yuanqing explains the im-portance of innovation. He states that the goal of Lenovo is to become a global local company and that in order to become so, it is important to profit from local talent. This, along with increased un-derstanding of local customers and markets, is the reason why the company invests in their key markets, either organically or through M&A. Furthermore; Yuanqing distinguishes between three types of business models used in the technology industry: the direct model, the supply model and the transactional model. Lenovo has adapted the latest, and Yuanqing believes that this model, which is funded on the theory of knowledge pull, is what works best with consumers. He is aware of the fact that customers request what is new and trendy and that is why he insists on pushing Lenovo’s products to the market before customers request them. Nevertheless, this statement can be discussed. We believe that even though Lenovo claims to launch their products into a whole new market, which is the main idea of knowledge pull, this doesn’t apply to all of their product launches. Lenovo wasn’t the first company producing cell phones, PC’s or tablets but today they produce their own versions of these products. This perspective on innovation rather fits the need pull theory, where the aim is to serve an already existing demand.
Finally, Yuanqing believes that one of the reasons that the company has been successful is that they have been able to foreseen the changes of the market, especially when it comes to the mo-bile-Internet trend. He argues that a company that outsources everything from manufacturing to R&D will lose the spark of innovation since others are doing the thinking. This, according to Kirkland and Orr (2013), is quite the opposite of the general view of Chinese companies; that they are mainly copying other company’s products. Yuanqing insists on the fact that their success is based on in-house, global R&D and investments in innovation. There are, however, strong critics to Lenovo’s innovation process, among which Mark R. Anderson (2013) stands out. In an article in The Forbes Magazine he claims that the era of great invention has come to an end and that ‘we move from inventors creating new avenues for productivity to thieves putting them out of business’. In a harsh tone, he holds Chinese companies such as Lenovo responsible for the losses of Western companies such as Apple and HP.

It is a fact that the technology industry is dynamic and ever changing and that the notions of inno-vation and invention can be examined from many different angles depending on your personal standpoint. We believe that the fact that popular products serve as an inspiration to other companies is hard to avoid but this isn’t necessarily equal to the end of invention.

 

 

Lenovo