Lenovo assignment on Smartphones & Tablets - L.I.M.E-5 Case Study


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Lenovo assignment on Smartphones & Tablets - L.I.M.E-5 Case Study

  1. 1. Lenovo Case Study December 15 2013 Prashant Panhale, Bhanu Bhatnagar & Arun Khedwal
  2. 2. Contents Sr. No. Index Page No. 1. Executive Summary 2-4 2. Definitions 5-6 3. Global Market Summary 7-8 4. Local Market Summary 9 -11 5. About Lenovo 12 -13 6. Financial Analysis 14 7. Marketing Strategy 15 8. S.W.O.T Analysis- Lenovo India 16 9. Lenovo Smartphones in India 17 10. Lenovo Tablets in India 18 11. Conclusion 19 1
  3. 3. Executive Summary - Worldwide combined shipments of devices (PCs, tablets and mobile phones) are projected to reach 2.32 billion units in 2013, a 4.5% increase from 2012, according to Gartner, Inc. - By the end of this year, 6% of the global population will own a tablet, 20% will own PCs, and 22% will own smartphones. Market - On average, there will be two smartphones for every nine people on earth, or 1.4 billion smartphones, by the end of 2013. - Tablets are showing faster adoption rates than smartphones. It took smartphones nearly four years to reach 6% penetration from when the devices first started to register on a global level. Tablets accomplished this in just two years. - Indian tablet market size rose 107.4 % year-on-year and 27.2 % quarter-on-quarter. - Tablet PC market in India is set to cross $2 bn by 2013. - The market is being driven by a shift to lower-priced devices in nearly all device categories. Drivers Driver - Low entry barriers - Increasing popularity of initiative social networking sites - Growing use of smartphones and tablets for playing games, growing in-app purchases for free games - Low cost data Plan and growing potential in emerging markets. - This growth is largely fueled by the need of security on smartphones due to increase in constant connectivity and demand for high bandwidth applications - Decreasing device and data costs. Challenges - Convincing consumers they need to upgrade their smartphones or Challenges tablets in every two year. - Price-sensitive consumer. Exchange rate fluctuations. - High excise & Import duty 2
  4. 4. - Competing to build superior products based on the same information - The premium class of tablets & smartphones is generating the Trends majority of revenue in the global tablet & smartphone market. - IDC also predicts Android will continue to be the dominant smartphone & tablet market. - IDC: 87% Of Connected Devices Sales By 2017 Will Be Tablets And Smartphones - The trend of customers upgrading existing mobile handsets to smartphones and acquiring tablets, along with other mobile internet services, such as dongles and data cards, has provided new growth opportunities for the mobile communications sector. - Samsung and Apple dominated the worldwide smartphone & tablet Competition market - In operating system Android hold a 61 per cent market share followed by Apple’s iOS, which have 25 per cent other platforms, such as Windows and RIM’s Blackberry OS, are in single figures. Smartphone Penetration 3
  5. 5. Tablet ownership, 2013 compared to 2012 4
  6. 6. Definitions Cloud storage: - Internet-based data storage capacity which can be purchased or is available free of charge; usually available on an as-needed basis and generally expandable as more storage capacity is required. Data usage: - Data usage includes all data transferred via uploads and downloads from a smartphone or tablet. This data may be transferred through one of a number of connections that the smartphone or tablet can utilise, including a WiFi connection or a mobile network connection supplied by a mobile network provider such as Vodafone, Airtel, Loop, BSNL, MTNL etc. Mobile networks: Mobile networks are wireless networks which are used for communications and are capable of transmitting data over significant distances. In India, mobile networks are owned and operated by Vodafone, Airtel and Loop. Data speeds over mobile networks can vary and may be defined as 2G, 3G or 4G (To be launched).  2G: Second generation mobile network (analog being the first) and first generation digital mobile network which allows download speeds roughly comparable with dial-up internet access. Users outside the range of 3G and 4G networks, but still with mobile coverage, will generally be able to transfer data at 2G speeds.  3G: Third generation mobile network which facilitates data transfer speeds faster than speeds over a 2G network. Data transfer speed over 3G networks in good coverage areas is roughly equivalent to speed over a fixed ADSL connection.  4G: Fourth generation mobile network which facilitates data transfer speeds faster than 3G and 2G networks. Data transfer speed over 4G networks in good coverage areas is faster than speeds over a fixed ADSL connection and may be as fast as some cable internet connections. 4G coverage in India is to be launched, but it is expected providers will greatly expand coverage in the coming years. 5
  7. 7. Mobile apps: Mobile apps (short for applications) are software-based tools which can be downloaded and installed on a smartphone or tablet to enhance the device’s functionality. A piece of software that allows a user to view their banking information on a smartphone or tablet is an example of a mobile app. Operating system: The software that supports a computer’s basic functions such as scheduling tasks, executing applications, receiving input from the user and controlling the display. In India, the two most common operating systems for smartphones and tablets are: iOS: proprietary software used by Apple devices such as the iPhone and iPad. iOS content is limited to content directly supported by Apple. Android: an open-source platform that is used by a variety of smartphone devices, including some of those manufactured by HTC, Motorola and Samsung. Other operating systems available include: Windows, including the newly released Windows 8: Microsoft’s latest operating system, Windows 8, is now the primary operating system of Nokia smartphones and Microsoft’s Surface tablet. Blackberry OS: operating system of the Blackberry smartphone. Symbian: Until 2011, Symbian was the operating system of Nokia smartphones, which have since migrated to Windows 8 as their primary operating system. It is still used as the operating system for some older model Nokia smartphones. Smartphone: A smartphone is a mobile phone built on a mobile operating system, with more advanced computing capability and connectivity. In particular, smartphones are often characterised by the ease with which they can access information online and their ability to have their functionality expanded through custom-designed apps. Examples of smartphones include Apple iPhones, Android phones, such as HTC Desire and Samsung Galaxy, Windows mobile phones, such as the Nokia Lumia series and HTC Mozart, and Blackberries. Tablet: A handheld, internet-enabled, wireless personal computer usually having a touchscreen or a digital pen-enabled interface, and no hardware keyboard. Tablets may have WiFi-only or WiFi connection plus mobile internet connectivity. Most noniOS tablets can also connect to the internet through a USB port. 6
  8. 8. Global Market Summary of Smartphone and Tablet The smartphone and tablet technology marketplace is now global, with devices typically launched simultaneously across multiple countries, accompanied by worldwide marketing and, for high profile brands, multimedia events. As still makes up a relatively small portion of the smartphone and tablet market, it does not have a significant impact on global trends. Rather, global developments and trends may have a strong bearing on developments and trends seen here, with pre-purchase reviews easily accessible online, apps transcending international borders keep pace with the latest global trends. With the power of super charged processor, open platforms, consumer can now multitask & experience the wonder of mobile applications like never before. This section examines the latest global trends and developments to provide context for patterns observed in the marketplace for the supply of smartphones and tablets.  There are 6.8 billion mobile subscriptions worldwide.(Year 2013) Over half of the world’s mobile subscribers are in Asia Pacific  The top 12 countries account for more than 56%of the world’s total mobile subscriptions.  29 % of the world’s mobile users live in India and China.  Gartner (February 2013): 1.746 billion handsets were sold in 2012, down 1.7 % from 2011. (These figures include feature phones & Smartphone sales).  Gartner (February 2013): predicts mobile device sales will grow to reach 1.9 billion units in 2013. Smartphone sales are expected to hit 1 billion units in 2013, which means that for the first time smartphones will outsell feature phones. The star performer is Samsung, which accounted for more than 2024 % of all handsets sold in 2012 and more than 30 % of smartphones.  By the end of 2013, global smartphone penetration will have exploded from 5% of the global population in 2009, to 22%. That's an increase of nearly 1.3 billion smartphones in four years.  On average, there will be two smartphones for every nine people on earth, or 1.4 billion smartphones, by the end of 2013.  According to IDC, Android holds 79.3% share in global smartphone market. Apple's iOS is second with 13.2% while Windows Phone is third with 3.7% share. 7
  9. 9.  Globally today smart phones contribution stands at 27% of handsets sales, going as high as 63 % & 51 % in the developed telecom markets of North America & European Union respectively.  It has led consumers to use their handsets in ways reaching far beyond the rudiments of basic mobiles phones.  It’s no surprise that the adoption of smartphones & tablets worldwide has grown vertically in the short spans of last 2 years. 8
  10. 10. Local Market Summary of Smartphone and Tablet Smartphone category in India is still very nascent at 8-10 %.Smartphone use is booming in India and is quickly becoming the dominant way many of the country’s 900 million mobile phone users stay connected. Looking at recent trends, the country may have as many as 40 million of these devices in use by early this year. The dramatic growth is being driven by a desire among users to stay connected and have instant access to social networking sites – a global trend that represents an exponential growth opportunity in developing countries like India. Indian Tablet PC market will cross $2 billion of revenue by the end of 2013. The growth is lead by increased use of tablets in education and enterprise sectors.  62% of recent smartphone buyers chose Android  More than one in 10 smartphone owners intended to purchase a tablet  Among users who paid for apps, 58% purchased games making it the most popular category According to MAIT, the apex body representing India's training and R&D services sectors, IT hardware industry, tablet sales in 2012-13 were at 1.9 million units as against 0.36 million units in 2011-12 witnessing a massive growth of 427 per cent. CyberMedia Research (CMR) stated that the Indian tablet market increased 107.4 per cent year-on-year to 1,150,000 tablets in the second quarter of 2013. Global research firm IDC stated that the overall tablet market in India has crossed 2.66 million units and will reach 6 million units in 2013. A recent IDC report stated that tablet sales will surpass PCs in Q4 of 2013 and will surpass total PC shipments on an annual basis by 2015 year end. According to IDC, Google's mobile operating system has a 91% market share in the country, giving it an overwhelming lead over its competitors. The second most used mobile OS in the country is Windows Phone, which has a market share of 5.4%. The figures from IDC, which tracks units of phones shipped in a market, are for the second quarter of this year. Apple’s iOS, which powers iPhones, has a market share of just 2.3%. 9
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  13. 13. About Lenovo Lenovo Group Limited is a US $ 34 billion company into personal technology, company serving customers in more than 160 countries. It is largest personal computer vendor in the world, having recently surpassed Dell & HP. Formed by Lenovo Groups acquisition of IBM’s personal computer business in 2005. Lenovo's acquisition of IBM's personal computer division accelerated access to foreign markets while improving both its branding and technology. Lenovo paid US$1.25 billion for IBM's computer business and assumed an additional US$500 million of IBM's debt. A global Fortune 500 company. Lenovo’s business is built on product innovation, highly efficient global supply chain & strong strategic executions. Its product line includes Legendary Think-branded commercials PC’s era & Idea branded consumer PC’s, as well as servers, workstations, and a family of mobile internet devices, including tablets & smartphones. Lenovo has major research centres in Yamato, Japan; Beijing, China; & Raleigh, North Carolina. Approximately 35,000 employees worldwide. Lenovo continued to drive its unique hybrid manufacturing strategy & invest in vertical integration. Currently the manufacturing facility at Beijing, Shanghai, Chengdu, Hefei, Huiyang & Shenzhen, China; Pondicherry, India; Monterrey, Mexico; Itu, Brazil; as well as Whitsitt, North Carolina in the USA., with contract manufacturing & Original Design Manufacturing Locations worldwide. In 2012, Lenovo made a major effort to expand its market share in developing economies such as Brazil and India through acquisitions and increased budgets for marketing and advertising. While Lenovo has not revealed its total spending on marketing, it did increase marketing and advertising expenditures by $248 million in the fiscal year ending in 2012. 12
  14. 14. Lenovo – China In China, Lenovo has a vast distribution network designed to make sure that there is at least one shop selling Lenovo computers within 50 kilometres of nearly all consumers. Lenovo has also developed close relationships with its Chinese distributors, who are granted exclusive territories and only carry Lenovo products Lenovo previously benefited from the Chinese government’s rural subsidy, part of a wider economic stimulus initiative, designed to increase purchases of appliances and electronics. That program of subsidies, which Lenovo joined in 2004, ended in 2011. Lenovo enjoys consistent price premiums over its traditional competitors in rural markets and a stronger local sales and service presence. Lenovo – India Lenovo has gained significant market share in India through bulk orders to large companies and government agencies. For example, the government of Tamil Nadu ordered a million laptops from Lenovo in 2012 and single-handedly made the firm a market leader. Lenovo distributes most of the personal computers it sells in India through five national distributors such as Ingram Micro and Redington. Given that most smartphones and tablets are sold to individuals Lenovo is pursuing a different strategy making use of many small state-centric distributors. Amar Babu, Lenovo's managing director for India, said, "To reach out to small towns and the hinterland, we have tied up with 40 regional distributors. We want our regional distributors to be exclusive to us. We will, in turn, ensure they have exclusive rights to distribute Lenovo products in their catchment area." As of 2013, Lenovo had about 6,000 retailers selling smartphones and tablets in India. In February 2013, Lenovo established a relationship with Reliance Communications to sell smartphones. The smartphones carried by Reliance have dual-SIM capability and support both GSM and CDMA. Babu claims that the relative under-penetration of smartphones in India represents an opportunity for Lenovo. In India, where Lenovo is relatively unknown, Lenovo grants distributors exclusive territories, but allows them to sell computers from other companies. Lenovo uses its close relationships with distributors to gain market intelligence and speed up product development. 13
  15. 15. Lenovo Financials Year over year, Lenovo Group Limited has been able to grow revenues from $29.6B USD to $33.9B USD. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 88.35% to 87.97%. This was a driver that led to a bottom line growth from $473.0M USD to $635.1M USD 14
  16. 16. Marketing Strategy Lenovo Group, the Chinese computer maker which has rapidly gained market share over the last three years on the back of a string of acquisitions around the world, is now aggressively eyeing the emerging markets, including India. The company is on track to become the world's largest PC maker, trailing market leader HP by a slim margin, according to research group IDC. The “Protect & Attack” strategy is a key to Lenovo’s success, the right strategy for PC Plus world. It is driving record market share, improve profitability & a more balanced business for Lenovo. Source: Lenovo Annual report 15
  17. 17. SWOT Analysis Lenovo has consistently improved its position both in global capabilities and in market understanding during the past several years, and its market share growth has reflected these improvements. It continues to provide well-designed products at very competitive prices. Lenovo is becoming a stronger option for organizations requiring global PC deployments, and is a strong viable supplier for all business notebook and desktop requirements. Strengths  The Lenovo goods and services have good quality  The brand recognition and traditional reputation of Lenovo are very good  Expanding global markets strategy of the marketing  The diversification of products  Owns very convenient and beautiful images  Good public relationship and sponsorship Weaknesses  Single marketing channel, the products and services are mainly sold by monopolized stores  Large number of product lines lie in the expansion of overseas  Product styles are too fewer to choose  Marketing sources are not rich  Prices are not cheap Opportunities  Takeover Lenovo to become the largest computer seller  Specialty business computer industry takes larger market in the world  European countries‟ market exploration, such as England, France, Italy, Germany, and so on  Division of products Threats  There are too many cheap products appearing in the world  Competition from other shoppers embedding on form factors more pleasing to the consumer  The market protect in some countries is strong  Foreign exchange rate fluctuations 16
  18. 18. Lenovo Smartphones in India Lenovo smartphones are priced between Rs 4,999-Rs 28,999 and have Android operating system in four different series A, S, P & K. K Series- Premium, Ultra-Slim Smartphones: State-of-the-art smartphones featuring the latest processor, display, and camera technology. S Series Elite Entertainment Smartphones: Sleek smartphones designed for video, music, and gaming with powerful processors, high resolution displays, and studio-class audio. P Series Professional Smartphones with Epic Battery Life: Extra-long battery life, IPS displays, and powerful processing will keep you connected on the road and in the office. A Series Action series smartphones for the young Doers: Entry level smartphones with extensive feature sets offering a great experience at a low price. Source: Google Images 17
  19. 19. Lenovo Tablets in India Lenovo Tablets are priced between Rs 6,999-Rs 39,990 and have Android operating system in four different series A, S, Lynx & Yoga. Tablets with Calling Facility Tablets without Calling Facility 18
  20. 20. Conclusion From the strategic marketing theory and applied research, we can see that the marketing strategy of the Lenovo competition is not watching competitors, and only targeting to market shares, but the Lenovo must choose the correct target markets and market positioning, This position must be conducive to the long-term competitive edge in the market building, and the development of marketing strategies must support the market, help enterprises in voluminous and complex competition in the market environment find a way out for the development of enterprises. Obviously, the strategic marketing is the only way for facing with the new changes in the market economy and Lenovo does those and its marketing strategy and operations are market-orientated. ___________________________________________________________________ 19