Team 6Uravee | Malindile | Ashley | Jordan | Yanik | Jamie | MaximilienA technology Legend in China(HBSP case #9-701-052)
In 2001, Mr. Liu (CEO, Legend) is faced with animportant question:How can we increase revenues from US$2.3bn toUS$10bn by ...
Agenda (our framework for today)How can we increase revenues from US$2.3bn to US$10bn by 2005?How did Legend (the “underdo...
HistoryTimelineCurrent StrategyLCS and Digital ChinaGrowth GapMaxHistoryInternal AnalysisSWOTExternal AnalysisCurrent Stra...
In 1984, 11 colleagues from the Chinese Academy of Sciencewere given $24,000 to start what would later become (a)Legend„84...
In 1984, 11 colleagues from the Chinese Academy of Sciencewere given $24,000 to start what would later become (a)Legend„94...
At this point, Legend‟s 3-5 years strategy is to strictlyfocus on the Chinese market and to expand existingproduct linesIn...
At the end of 2000, Mr. Liu restructured the companyinto two distinct businessesReference: Exhibit 15Legend ComputerSystem...
To achieve the US$10bn goal, Legend needs tosustain a 35% CAGR for the next 4 yearsRevenues($, bn) 101989 1991 1993 1995 1...
Jordan‟s takeaways from the history1. Objective: Become a Fortune500 company by 20102. Goal: US$10bn in revenues by 20053....
Internal AnalysisCorporate StrategyLeadershipMalindiHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlterna...
Legend‟s Corporate Strategy evolved over time,always adapting to the marketDistributionLocal overGlobal“No Joint Ventures”...
Cost UniquenessBroadTarget(all China)NarrowTargetCost Leadership DifferentiationFocusedCost LeadershipFocusedDifferentiati...
 Visionary: One dream, One goal Focus on product development Strategic partnerships and acquisitions Pioneer in offeri...
Jordan‟s takeaways from the internalanalysis1. Corporate Strategy: agile, always changing and adapting to marketconditions...
SWOTStrengths & WeaknessesOpportunities & ThreatsUraveeHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlte...
Strengths and weaknesses that help explainhow Legend become the #1 PC manufacturer inChinaStrengths Distribution network...
Opportunities and threats shaping Legend‟scorporate strategy in 2001Opportunities Growth in internet usage inChina Growt...
Jordan‟s takeaways from the SWOTanalysis1. Strengths & Weaknesses: Strong distribution network, but weakinternational bran...
External AnalysisCompetitive LandscapeMarket SizePEST HighlightsJamieHistoryInternal AnalysisSWOTExternal AnalysisCurrent ...
Legend increased market share by underpricingcompetitors and customizing its products.6.90%2.30%28.20%Market Share of Majo...
Legend has key strategic advantages over itscompetitors, which can position it well in the future forboth LCS & DCLegend C...
But Legend also needs to consider some importantPolitical and Social factors into considerationPolitical China accepted t...
Jordan‟s takeaways from the externalanalysis1. Competitive Landscape: Legend increased market shared bycapturing most of t...
Current StrategiesTian Xi Computer & One-touch-to-the-NetFM365 online portalDigital ChinaAshley & YanikHistoryInternal Ana...
Factors affecting internet market in China in2000Factors affecting Legend Computer Systems Internet was just starting to ...
Legend‟s Three Strategies to Capture the InternetMarket in ChinaTian Xi PC-One-touch-to-the-Net1FM 365 Portal2Digital Chin...
Key Features of Tian Xi Included a Chinese voice-recognition software Graphic processor for handwriting Chinese characte...
Tian Xi PC & One-touch-to-the-Net was aBrilliant StrategyLegends focused and leveraged their core competencies Local know...
Key Features Default web page integrated on each Tian Xi computer sold Features information channel, a virtual community...
FM365 portal is not a good fit with Legend‟s corecompetenciesHaving a portal is a good idea Helps users find information...
Develop systemintegrations andnetworkingcapabilities/productsProprietary e-commercesoftware platformFocus on industrialseg...
B-to-B online business model fits Legend’s core competencies Takes advantage of local market knowledge, Relationships wi...
With the current strategy, there is still a US$1bngap that will need to be filledLegend Computer Systems: $USD 5.6 billion...
Jordan‟s takeaways from the currentstrategies1. Successful implementation: focus on core competencies andleverage knowledg...
Alternative StrategiesScale Up: cell phonesScale Out: international marketsAshley & YanikHistoryInternal AnalysisSWOTExter...
To fill this US$1bn gap, Legend has two high-leveloptions: scale up or scale outInternational marketsChinaDevelop or Acqui...
Scale Up: Product/Solution ExpansionLCS core business:PC, Notebook, Server, PDA, STB, Motherboard.Manufacturing &Distribut...
Recommendation for Scale Up: Cell PhoneMarketCell phone market offers a tremendous opportunity to close the gap Low cell ...
Projected Sales for Cell Phone Market until2010Our projections By 2005, we project a total cell phone sales of 673,000,00...
Scale Out: Market Expansion PotentialChinaSingapore TaiwanHong KongSouth-east AsiaJapanKoreaUSA Europe EmergingMarkets
Scale Out: Expanding to Other MarketsStage 1: Taiwan and Singapore Close proximity for distribution Products currently a...
Jordan‟s takeaways from the alternativestrategies1. Scale up: Complimentary products (cell phones)2. Scale out: Taiwan and...
ConclusionWrap-UpWhat happened?Key TakeawaysJordanHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlternati...
Wrap-up: the key questions we seek out toanswerHow did Legend (the “underdog”) beat the “top dogs” and becomethe #1 PC man...
So What Actually Happened?„01 „02 „03 „04 „05 „06 „07 „08 „09 „10 „11 „12 „13
Key Takeaways…Market Understanding Design for the market‟s special demands (understanding the consumer) A local office (...
Thank you!Team 6Uravee | Malindile | Ashley | Jordan | Yanik | Jamie | Maximilien
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Hult IBS - Case Study HBS 701052 -- Legend Lenovo -- FEB-2013

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Case Study of HBS 701052: Technology Legend in China as part of Global Strategy (STR5923) at Hult International Business School

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Main question:
How can we increase revenues from US$2.3bn to US$10bn by 2005?

Secondary questions:
Is the current strategy sufficient to achieve that goal? And if not, what else could be done?
How did Legend beat the “top dogs” and became the #1 PC manufacturer in China?

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  • ‘88: AST now #1 PC vendor in CN‘89: Caught attention of Government. MEI inspect HK‘91-92-93: all competitors are signing JVs with international big manufacturers… Not Legend.
  • ‘88: AST now #1 PC vendor in CN‘89: Caught attention of Government. MEI inspect HK‘91-92-93: all competitors are signing JVs with international big manufacturers… Not Legend.
  • Objective: Fortune500 by 2010Goal: US$10bn in revenues by 2005Strategy: Split the business (LCS / Digital China) and localization(stay focused on China for 3-5 years)Is this enough??
  • Logistics:OrderingCustoms clearanceAfter-sales ServicesNotes:Legend’s strong distribution network was seen as inefficient, and digital infrastructure in China was at a very early stage of development. Legend partnered with SOE’s to leverage its distribution network through digital enhancements…Digital China Focuses:Online Distribution: ordering online, customs clearance, after-sales serviceSystem Integration: Supply Chain ManagementNetworking – e-solutions: banking, tax collection, telecomPage 14 – Distribution strategy and building up its nationwide distribution network.First Mover advantage again competitors Commerce One and AribaDC “inherited from Legend the Largest and most efficient dealer network in the IT industry.”See Strategy Slide Continued for additional DC strategy including e-channel and e-solution.
  • Born in 1944, Mr Liu was denied to be a military pilot due to family background (activist)He entered the Xi'an Military Electronic Engineering Institute (specializing in nuclear weapons and missiles).Due to his sensitive background, Lui was assigned to study radar. During his studies Liu received an introduction to computing.In 1966: Liu was labeled an intellectual during the Cultural Revolution. Sentencd to a state-owned rice farm near Macau for commenting on the revolutionThen, sent to a farm in Hunan dedicated to reforming political criminals through hard laborIn 1970:Liu took up a post in Beijing as an engineer-administrator at the Computer InstituteLui worked on mainframe computer (number 757)His Leadership style can be described as visionary. He steered the company from the beginning with focus on product development, from Lian Xiang in 1985 to Tian Xi in 1999. When the company was not granted license to manufacture in China, he moved to Hong KongAlong the way he made strategic partnership, such as the one he made with Dao Yuan, a hongkong based company. A partnership which Mr Liu himself described as “the blind carrying the lame”. A partnership which allowed Legend to enter the competitive Hong Kong market. He also made acquisitions that took the company in the direction he envisioned, such as the acquisition of the QDI, a motherboard manufacturing company in order to expand into the motherboard and PC markets.His vision led him to pioneer the offering of stock option to employees, the first company to do so in China, this resulted in 35% of Legend holding owned by the employees.This is how he described his decision to stay in PC manufacturing in 1993….
  • Thank you _____________ . After understanding the ____________________________ it is essential to get a better sense for the Legend outlook in terms of the corporate market, it is helpful to understand the internal analysis of the company by its strengths and weaknesses.StrengthsLegend’s major strength was the knowledge of the current market needs. They recognized the need of Chinese language solutions for PC’s and developed a new pattern recognition technology. Mr. Liu had established a high degree of leadership. Yanik will give you more details later about how Mr. Liu manage the company.In 1990 Legend got its license to manufacture PCs in China.Develop desktop PC based on local needs. In 1999 Legend’s launch of the Tian Xi based on localized design.Legend moved from a small bungalow and established its outlets in many parts of the world.By 1997, Legend had over 3000 distributors/POS in China (expected 10,000 by 2004).WeaknessesLegend management was comprised of many young staff and management with very less work experience. By 1994, the general manager cut the sales force from 100 sale representatives to only 18 people. They wanted to sell products through a distribution channel rather than direct sales. This lead to less control over marketing, less insights into innovationAt that time Chinese computers or products were considered less reliable compared to foreign product.Lack of an international recognition.No preferential tax treatment from the government.
  • Thank you _______________. Now that we have discussed the internal analysis lets talk about the external analysis of this company. I will start with the Opportunities.OpportunitiesBy July 2000, Internet penetration accounted for only 1.4% of the Chinese population. This is mean there was a growing market in Internet usage in China.Potential to be largest market in the world: 1.25 billion peoplePenetration rate 2000: 1.4% (16.9 million users)  Projection for 2003: 2.7% (34 million users)Estimation of e-commerce revenues:1999: $US 43 millions in revenuesProjection for 2004: $US 12 billionsChina is one of the world fastest growing market and this an opportunity for distribution growing Tian Xi PC also included Chinese voice recognition software and a graphics pad for handwriting Chinese characters. This product became the most popular desktop system in China is tailored to local market.As China is a fast growing market, the establishment of distribution channels are needed in this market.Rapidly growing internet portal and B2B e-commerce such as Alibaba is now a popular online B2B community. Distribution business to an online B-toB marketplace would be an advantage over foreign competitors. China is the fastest growing market and also the one of largest population, so there is growing in service and products industry.Alternative access devices such as wireless devices has come to play big part of the market, eg. mobile phones and personal digital devices.With China’s internet advances more people have access to the Internet and have started depend more on the online world, for instance online banking and online shopping. ThreatsAfter China agreed to joining WTO in 2001, this increased the global competition because foreign companies can now engage in trading and distribution- related services for both imported and self-ownership. This can be a high competition within local market.In 1993 many domestic Chinese manufacturers establishing joint ventures with foreign companies in multiple regions across China in order to expand their market. This is the threat for the Legend, loss of sales because of the increase in foreign product sales volume, also after joining WTO, foreign company allow to set up their own distribution channel. This will increase the competition within the local market.
  • -Legend gained market share by leveraging low manuacturing costs to underprice competitors, and including a chip on motherboards to provide Chinese-language operating systems.-Legend has the largest market share for PC sales in China. -This is at risk with China lowering Import tariffs with the pending admission to WTO
  • Although PC usage is increasing, Legend will face stiffer competition from foreign firms.They also need to leverage the digital environment that is still being established.
  • In 2001, Legend Holdings had three distinct strategies to reach its goals:Tian Xi Computer & One-touch-to-the-NetFM365 portal Digital ChinaWe will now analyse those and determine if Legend is on the right path to meets its goal.
  • LCSService-for-fee concept not yet adapted (not willing to pay for internet accessDCLow credit card penetration rateChinese perception: Lack of security, Web site legitimacy, Quality of goods, Safety of information transmitted
  • Simplistic access to internet with one button on computerPlug-and-play featureFree Internet for one year for computer buyer (special deal with China Telecom)
  • 1 million users, 15.4 million daily page views by 2001
  • In first phase: migrate current business to internetSecond phase: Extend product line (telecom equipment and consumer electronics), expand dealer network (from 3000 to 10000 by 2004), and reallocate its internal resources to form individual service modules (net-banking, order fulfillment, customs clearance and after-sales service)Phase three: open system to all partners to provide frictionless transactions along whole distribution channel. Be a supply-chain manager rather htan a product distributor. E-soulution: Develop legend’s system integration and networking capabilitiesFocus resources on industrial segments (banking, telecom, and tax collection)In order to have a fully integrated proprietary e-commerce software platform
  • Objective: Fortune500 by 2010Goal: US$10bn in revenues by 2005Strategy: Split the business (LCS / Digital China) and localization(stay focused on China for 3-5 years)Is this enough??
  • ‘94: Low Cost model. Inv Turnover improved to 7 times. 30 offices worldwide. ‘95: Distr. Agreement with HP (PC, Servers) and with Toshiba, Apple, Sun…*‘96: Insight: Foreign manufacturers don’t launch in China until 4-5 months later (b/c high tariffs and low consumption‘98: Start customizing products to CN customers
  • For any industries… Success? Failures? What worked well, what didn’t, what can be replicated…?Do not underestimate the competition (e.g. the PC price wars)Take the risk and promote young talent, people who understand the company’s core business and prevailing market trends
  • Hult IBS - Case Study HBS 701052 -- Legend Lenovo -- FEB-2013

    1. 1. Team 6Uravee | Malindile | Ashley | Jordan | Yanik | Jamie | MaximilienA technology Legend in China(HBSP case #9-701-052)
    2. 2. In 2001, Mr. Liu (CEO, Legend) is faced with animportant question:How can we increase revenues from US$2.3bn toUS$10bn by 2005? Is the current strategy sufficient to achieve that goal? And ifnot, what else could be done? How did Legend beat the “top dogs” and became the #1 PCmanufacturer in China?
    3. 3. Agenda (our framework for today)How can we increase revenues from US$2.3bn to US$10bn by 2005?How did Legend (the “underdog”) beat the “top dogs” and becomethe #1 PC manufacturer in China?1. History2. Internal Analysis + SWOT3. External AnalysisIs the current strategy sufficient to achieve that goal? And if not, whatelse could be done?4. Current Strategies5. Alternative Strategies6. Conclusion
    4. 4. HistoryTimelineCurrent StrategyLCS and Digital ChinaGrowth GapMaxHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlternative StrategiesConclusion
    5. 5. In 1984, 11 colleagues from the Chinese Academy of Sciencewere given $24,000 to start what would later become (a)Legend„84 „85 „87 „88 „89 „90 „91 „92 „93 „94
    6. 6. In 1984, 11 colleagues from the Chinese Academy of Sciencewere given $24,000 to start what would later become (a)Legend„94 „95 „96 „97 „99„98 „00 „01
    7. 7. At this point, Legend‟s 3-5 years strategy is to strictlyfocus on the Chinese market and to expand existingproduct linesInternational marketsChinaDevelop or AcquireNew Products/SolutionsFocus onCurrent Product Lines
    8. 8. At the end of 2000, Mr. Liu restructured the companyinto two distinct businessesReference: Exhibit 15Legend ComputerSystems (LCS) Legend Brand Internet AccessDevices PCs Notebooks Servers PDAs Motherboards Internet Services FM365 Internet accessDigital China (DC) Online Distribution Distribution foreign brand IT Logistics System integration Banking Tax collection Telecom Networking e-solutions WAN VOIP Commercial & HouseholdNetworking
    9. 9. To achieve the US$10bn goal, Legend needs tosustain a 35% CAGR for the next 4 yearsRevenues($, bn) 101989 1991 1993 1995 1997 1999 2001 2003 20052468$1.5bn$10bn$0.6bn$2.3bn
    10. 10. Jordan‟s takeaways from the history1. Objective: Become a Fortune500 company by 20102. Goal: US$10bn in revenues by 20053. Strategy: stay focused on China, split the business LCS/DC
    11. 11. Internal AnalysisCorporate StrategyLeadershipMalindiHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlternative StrategiesConclusion
    12. 12. Legend‟s Corporate Strategy evolved over time,always adapting to the marketDistributionLocal overGlobal“No Joint Ventures”ManufacturingR&DEconomies of ScaleDifferentiation(focus on functionality)Product Customization(“Tian Xi”)
    13. 13. Cost UniquenessBroadTarget(all China)NarrowTargetCost Leadership DifferentiationFocusedCost LeadershipFocusedDifferentiationIntegratedCost Leadership/DifferentiationTo keep their competitive advantage, they constantlyadapted their strategy‟85: Chinese insertion card‟88: Buy QDI(manufacturing)‟96: Aggressive PricingStrategyMilestones‟96: Focus on functionality„99: Tian Xi
    14. 14.  Visionary: One dream, One goal Focus on product development Strategic partnerships and acquisitions Pioneer in offering stock option to employees Strong corporate culture Authoritarian but adaptive leadership style Legend became an employer of choice for Chinese engineers and managerswith overseas education Promoting young talent internally In 1993, he promoted 29 year old Yang Yuanqing as the general manager forPCBU In 2000, 3 of the top 7 executive are under 40Mr. Liu‟s Leadership was instrumental inLegend‟s success“(Foreign companies) don’t have glass ceiling for local employees,but Legend has helicopters.”“We were really not sure whether we could survive in the PCmanufacturing industry. Given our background, making ourown PCs was the dream of the whole company. […] Wedecided to hang on to manufacturing for one more year.”
    15. 15. Jordan‟s takeaways from the internalanalysis1. Corporate Strategy: agile, always changing and adapting to marketconditions…2. Leadership: one dream, one goal, one man…
    16. 16. SWOTStrengths & WeaknessesOpportunities & ThreatsUraveeHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlternative StrategiesConclusion
    17. 17. Strengths and weaknesses that help explainhow Legend become the #1 PC manufacturer inChinaStrengths Distribution network Local company haveknowledge of the market Good leadership Manufacturing capabilities Specialized product for localmarket (China)Weaknesses Lack of an internationallyrecognized brand Limited direct sales force Chinese computers/productsconsidered less reliable Limited foreign markets forcurrent products
    18. 18. Opportunities and threats shaping Legend‟scorporate strategy in 2001Opportunities Growth in internet usage inChina Growth of voice recognitionsoftware Rapidly growing internet portaland B2B eCommerce Growth for demand in alternativeaccess devices Growth in eCommerce andonline advertising Increase in global competition Customs clearance i.e. moreforeign competitors Reduction in prices Heighten domestic competition International competitors justentered the market Mostly by establishing JointVentures Internationally recognized brandsentering the market massively Foreign company create owndistribution channel.Threats
    19. 19. Jordan‟s takeaways from the SWOTanalysis1. Strengths & Weaknesses: Strong distribution network, but weakinternational branding2. Opportunities & Threats: internet usage is booming and competitionincreases
    20. 20. External AnalysisCompetitive LandscapeMarket SizePEST HighlightsJamieHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlternative StrategiesConclusion
    21. 21. Legend increased market share by underpricingcompetitors and customizing its products.6.90%2.30%28.20%Market Share of Major Competitors - 1996LegendOther Big DomesticFirmsInternational28.10%22.20%16.90%Market Share of Major Competitors - 2000LegendOther Big DomesticFirmsInternational
    22. 22. Legend has key strategic advantages over itscompetitors, which can position it well in the future forboth LCS & DCLegend Computers Legend Founder IBM Dell ToshibaDistribution NetworkChina Customized PCsGov‟t RelationshipDomestic ManufacturingNo Import DutiesR&DLow PriceDigital China Legend CommerceOneAriba AlibabaeCommerce KnowledgeStrong SOE Relationships(Banks & Telecom)
    23. 23. But Legend also needs to consider some importantPolitical and Social factors into considerationPolitical China accepted to WTO Lower import tariffs Law: 75% of PC componentsmust be manufactured in China Government connectionsrequiredSocial PC penetration is increasing Credit card usage not yetcommon Users not accustomed to payingfor internet access
    24. 24. Jordan‟s takeaways from the externalanalysis1. Competitive Landscape: Legend increased market shared bycapturing most of the market‟s growth2. Strategic advantage: …and they are well positioned to continue todo so3. Political: Government highly influences the market
    25. 25. Current StrategiesTian Xi Computer & One-touch-to-the-NetFM365 online portalDigital ChinaAshley & YanikHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlternative StrategiesConclusion
    26. 26. Factors affecting internet market in China in2000Factors affecting Legend Computer Systems Internet was just starting to take off and the procedure to register an internet accountwas complicated Most users were not proficient at web-surfing Computer cost was equivalent to +/- one year salaryFactors affecting Digital China Logistics services and delivery infrastructures are inefficient and unreliable eCommerce revenues estimated to grow from US$0.05bn (1999) to US$12bn (2004) Of all internet users, only 12% ever purchased online
    27. 27. Legend‟s Three Strategies to Capture the InternetMarket in ChinaTian Xi PC-One-touch-to-the-Net1FM 365 Portal2Digital China3Package deal to provide easy accessto the internet while boosting PCsalesProvide consumer services in order tobecome China‟s one stop shopBecome dominant local IT verticaldistribution expert in China
    28. 28. Key Features of Tian Xi Included a Chinese voice-recognition software Graphic processor for handwriting Chinese charactersKey Features of One-touch-to-the-Net Provided consumers easy access to the internet One year free internet access subscription Plug-and-play featureTian Xi PC-One-touch-to-the-Net1
    29. 29. Tian Xi PC & One-touch-to-the-Net was aBrilliant StrategyLegends focused and leveraged their core competencies Local knowledge and responsiveness R&D department : innovation Manufacturing capabilitiesWith this strategy, Legend Gained competitive advantage over competitors: great differentiation Grew the PC and internet usage in ChinaResults Sales increased by 99% from 1998 to 1999 Sales increased by 50% from 1999 to 2000 Market shares: from 6.9% 1996 to 28.1% in 2000
    30. 30. Key Features Default web page integrated on each Tian Xi computer sold Features information channel, a virtual community (email & chat room), asearch engine and eCommerce servicesGoals Dominate China Internet Market Benefit from eCommerce & Advertising opportunities Make profits from service fees in two to three yearsHow was it done The FM365 portal was developed in-house Invested US$26 million for development and hired 200 employees Launched large-scale advertising campaign with teen idolFM 365 Portal2
    31. 31. FM365 portal is not a good fit with Legend‟s corecompetenciesHaving a portal is a good idea Helps users find information Develops e-commerce and advertising opportunitiesPortal development & management is not one of Legend’s corecompetencies Several portal already existed in China (i.e. SINA.com & China.com) Founder Electronics (main local competitor) signed an agreement with Yahoo!Legends resources could have been better invested using a differentstrategy Partnership with local portal or foreign player Acquisition of an existing portalResults 15th most visited website in China, but far behind direct informational portalcompetitors.
    32. 32. Develop systemintegrations andnetworkingcapabilities/productsProprietary e-commercesoftware platformFocus on industrialsegments (banking,telecom, and taxcollection)Strategy 1E-ChannelsPhase 1Migrate currentbusiness to internet(offline to online)Phase 2Extend to more productlines and dealer network.Reallocate resources toform service (net-banking, orderfulfillment, customsclearance and after-salesservice)Phase 3Offer complete E2Esupply managementsolutions to anypartners (greatermargins)Strategy 2E-SolutionsValue added shared servicesDigital China3Develop largest B-to-B vertical marketplace for the IT industry in China
    33. 33. B-to-B online business model fits Legend’s core competencies Takes advantage of local market knowledge, Relationships with different Chinese stakeholders Leverages distribution & network capabilitiesMigration to online distribution is the next logical step Increase profit margin by offering a value added supply-chain solution Do or die: if you do not do it, a competitor willBy offering a full supply chain solution Legend Gains a First mover advantage – no competitors offer the complete solution Difficult to copy : the partnerships are difficult to replicate Controls competition: If successful, global rivals will have to use DC‟splatformDigital China is a good strategy. It offers greatrevenues potential and leverages Legend‟s corecompetencies.Projected Revenues:US$3.5bn(2005)
    34. 34. With the current strategy, there is still a US$1bngap that will need to be filledLegend Computer Systems: $USD 5.6 billion (20% growthrate)Digital China: $USD 3.5 billionRevenues($, bn)101997 1998 1999 2000 2001 2002 2003 2004 20052468US$1bngap
    35. 35. Jordan‟s takeaways from the currentstrategies1. Successful implementation: focus on core competencies andleverage knowledge of local stakeholders2. Current strategies will not be enough to reach the US$10bn goal by2005
    36. 36. Alternative StrategiesScale Up: cell phonesScale Out: international marketsAshley & YanikHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlternative StrategiesConclusion
    37. 37. To fill this US$1bn gap, Legend has two high-leveloptions: scale up or scale outInternational marketsChinaDevelop or AcquireNew Products/SolutionsFocus onCurrent Product LinesScale UpScaleOut
    38. 38. Scale Up: Product/Solution ExpansionLCS core business:PC, Notebook, Server, PDA, STB, Motherboard.Manufacturing &DistributionLCSinternetservicesIT Management &ConsultingDigital china:Onlinedistribution, systemintegration, networking productsLegends‟ Core BusinessNew StrategyOpportunities for GrowthMaintenanceMobile phone &others communicationdevices
    39. 39. Recommendation for Scale Up: Cell PhoneMarketCell phone market offers a tremendous opportunity to close the gap Low cell phone penetration rate in China Rapid GDP growth (9-10% a year) and rising income Poor level of landline infrastructureLCS can leveraged its expertise & core competencies R&D / Innovation Expertise (3 years development plan) PDA Manufacturing expertise Distribution network Local knowledge expertise
    40. 40. Projected Sales for Cell Phone Market until2010Our projections By 2005, we project a total cell phone sales of 673,000,000 units Cell Phone Penetration level of 29,62% By 2010, we project a total cell phone sales of 2,318,000,000 units Cell Phone Penetration level of 65,72%Only a fraction of this market represent substantial revenues per year
    41. 41. Scale Out: Market Expansion PotentialChinaSingapore TaiwanHong KongSouth-east AsiaJapanKoreaUSA Europe EmergingMarkets
    42. 42. Scale Out: Expanding to Other MarketsStage 1: Taiwan and Singapore Close proximity for distribution Products currently adapted for Chinese language High PC penetration growth rate from 1995-1998Stage 2: Other Markets Need Partnership or Acquisition Lack established distribution network Need brand recognition Must adapt products for new market consumers91%166%
    43. 43. Jordan‟s takeaways from the alternativestrategies1. Scale up: Complimentary products (cell phones)2. Scale out: Taiwan and/or Singapore. Anywhere else, M&A required.
    44. 44. ConclusionWrap-UpWhat happened?Key TakeawaysJordanHistoryInternal AnalysisSWOTExternal AnalysisCurrent StrategiesAlternative StrategiesConclusion
    45. 45. Wrap-up: the key questions we seek out toanswerHow did Legend (the “underdog”) beat the “top dogs” and becomethe #1 PC manufacturer in China? Strong leadership Focus on Core competencies Consumer driven InnovationIs the current strategy sufficient to achieve that goal? And if not, whatelse could be done? No. Need to scale up or out
    46. 46. So What Actually Happened?„01 „02 „03 „04 „05 „06 „07 „08 „09 „10 „11 „12 „13
    47. 47. Key Takeaways…Market Understanding Design for the market‟s special demands (understanding the consumer) A local office (localization) will speed up a company‟s response to changingmarket trendsProduct/service Product differentiation (core technology and product features) Focus on current and future requirementsCompany strategy Set a clear goal; e.g. $10bn in 2005, Fortune500 in 10 years Focus on core strengths to grow and diversify to survive Resources, skills and management are all key for company success
    48. 48. Thank you!Team 6Uravee | Malindile | Ashley | Jordan | Yanik | Jamie | Maximilien

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