How the Chinese company has become a threat and become a leader in the world? What is driving Lenovo's growth?

2. The team
Cyril
GARRECH
Harshil
PARIKH
Wanzhen
WEI
Adma
MAHARJAN
Sagar
AGARWAL
2

3. O
U
T
L
I
N
E
External Analysis:
★ PC Industry
★ Value Chain
★ Pestle Analysis
★ Porter’s Five Forces Model
★ Growth
★ Strategic Map
Internal Analysis:
★ Vision and Mission
★ Value Chain
★ Business Model
★ BCG Matrix
★ SWOT Analysis
Forecasting
Recommendations
★ Strategic Options
★ How to achieve
★ Analysis
References

4. Analytical Engine,
Great Britain - 1837
ENIAC, USA -
1946 IBM PC, USA -
1911
Apple, USA -
1976
Dell, USA - 1984Lenovo, China -
1984
Acer, Taiwan -
1976
Origin of Computer
Silicon Valley
Companies
Asian
Companies
Concept of Computer
was envisioned in
London, Silicon Valley
companies led the
industry, now Chinese
PC manufacturer are
challenging the
leaders.

5. DO YOU THINK
CHINESE COMPANIES
CAN BE A THREAT AND
BECOME
A LEADER IN THE WORLD?

6. Chinese company plus M&A with “protect and Attack Strategy“
HISTORY OF LENOVO

7. 44,912$ millions revenue in 2016
Revenue Breakup
PC sector is a major contributor to revenue of lenovo

8. Global PC Sale
Global PC
shipments
continue their
downward
slide

9. EXTERNAL ANALYSIS
• PESTLE ANALYSIS
• VALUE CHAIN
• KEY SUCCESS FACTOR
• PORTER’S 5 FORCES MODEL
• OPPORTUNITY AND THREATS

10. PESTLE ANALYSIS

11. PC Industry Value Chain
ValueAdded
Main important parts are Design
and Distribution

12. New entrants
+
Supplier
s +
+++
Rivals
Substitutes
+++
Government
s
-
Customer
s ++
Competitive
The biggest threats are posed by competitors and substitutes
PORTER’S 5 FORCES

13. COMPETITORS MAPPING

14. MAPPING

15. KEY SUCCESS FACTORS
● Establishing a strong brand
Establishing a strong brand allows a company to gain market
share.
● Producing market- favored goods
This factor is necessary in order to sell anything at all.
● Economies of Scale and Competitive Pricing
These two success factors must be treated together because
price is the sales driver, and the price level is set by minimizing
the margin of production costs.

16. INTERNAL ANALYSIS
WHAT’S DRIVING
LENOVO’S GROWTH?

18. Advantage
of
ECONOMIES
OF SCALE

19. THE NEW LENOVO NEVER STANDS STILL

21. BCG Matrix - Product Lines
MarketGrowthRate
Market Relative Share
HIGH
HIGH
LOW
LOW
Stars
Poor Dogs Cash Cows
Question Marks

22. BCG Matrix - Country Wise
MarketGrowthRate
Market Relative Share
HIGH
HIGH
LOW
LOW
Stars
Poor Dogs Cash Cows
Question Marks

23. Lenovo’s Value Chain

24. R&D Expenditure and R&D Ratio
€1.08bn

25. Lenovo
• Employee: 80,000 +
• Revenue : US$ 44.91
billion
• Expenditure on R&D:
704,574 million
Oppo
• Employee: 290,526 +
• Revenue :US $ 360
million
• Expenditure on R&D:
48 million
Competitive Analysis

26. Strengths
• Vertical integration
• Competency in mergers and
acquisitions
• Low cost production.
• Strong patents portfolio
• Synergy of knowledge and
diverse workforce.
Weaknesses
• Low differentiation.
• Commodity products
• Poor brand perception in the
developed economies.

27. FORECASTING
Revenue target of $70 billion considering 12% YOY change

28. STRATEGIC
OPTIONS
1. Focus on CHINESE MARKET
Step 1. Increasing PC MARKET
Step 2. Becoming Leader in SMARTPHONE MARKET
2. Focus on US MARKET
3. Focus on DEVELOPING COUNTRIES MARKET
Step 1. Capturing PC Market
Step 2. Becoming Leader in SMARTPHONE MARKET

29. ANALYSIS OF THE OPTION

30. WHY CHINA??
PROS
• PC Leader in China
• Advantage of
economies of scale by
setting more
manufacturing units in
China where cost of
production is low
CONS
• Availability of many
competing companies
• Launch of many
substitutes to PC in the
market

31. How to Increase PC
Market?
RECOMMENDATIONS
- Introducing Innovative
Substitutes to PCs
“Just connect your own
display, keyboard, and
mouse, and you’re ready
to make big things
happen.”

32. How to Increase
Smartphone Market?
LENOVO Acquires Xiaomi in 2017
RECOMMENDATIONS

33. Acquire Xiaomi
Xiaomi saw sales of its smartphones
drop by almost 40% in China during
the second quarter of 2016 when
compared to the same period in
2015.
According to analyst Richard
Windsor revenues could drop a
further 10-20% in 2016 to give Xiaomi
a valuation of just $3.6bn
85% of the company's revenue
comes from smartphones
Foothold of Xiaomi in India is strong.
$1 billion Revenue (2016)
Total Revenue of Xiaomi = $11.9 B
(2015)
Addition of Revenue $10 Billion by
Acquisition

34. Focus on China and emerging countries in APAC
will contribute revenue of $ 22 Bn and $ 12 Bn
respectively in 2020
China sales will grow YOY 15.8% while APAC sales
will grow 13.7% YOY

35. As we can see revenue
percentage contribution from
mobile will increase while
from PC will decrease in
2020
In absolute terms revenue of
all product segment will
increase. Mobile segment will
see the major increase and
PC segment the least
Enterprise and other segment
will grow modestly

36. 1. SOUTH AFRICA
2. KENYA
3. NIGERIA
4. ETHIOPIA
5. INDIA
6. BANGLADESH
7. PAKISTAN
FOCUS IN DEVELOPING
COUNTRIES

37. AFRICAN COUNTRIES
“Smartphone Ownership and
Internet Usage Continues to
Climb in Emerging
Economies”
- Jacob Pushter’s academic article
WHICH COUNTRIES TO
ATTACK FOR SMARTPHONE MARKET ?
source : http://www.diapoimansi.gr/PDF/pew_research%201.pdf

38. WHY AFRICAN COUNTRIES?
Opportunities
• Africa is a very promising
smartphone market.
• African population is driving the
demand of cheap smartphones.
• Google & Microsoft have launched
smartphones < 100$
• The demand of smartphones is
driven by the use of mobile
paiement (52% according to
Deloitte) : Kenya, Tanzania,
Sénégal, South Africa, etc.
• + better high-speed broadband
and reduction of connexion costs
Challenges
• Difficulties in terms of distribution
• African customers are very
sensitive to the price
• Samsung owns more than 50% of
the African market share

39. WHY India, Bangladesh & Pakistan?
Opportunities
• Lenovo already has a good
distribution network in India
• They have common local
language ’Urdu”
• Advertising message can be
similar to 3 countries due to similar
cultures
Challenges
• Difficulties to make application
for other local languages than
Urdu
• African customers are very
sensitive to the price
• Samsung owns more than 50% of
the African market share

40. WHAT GROWTH CAN WE
EXPECT IN AFRICA ?
Lenovo’s revenues in Europe/Middle
East/Africa
From 2013 to 2019
24,8% 27,7% 27% 28% 30% 33% 36%
2013 2014 2015 2016 2017 2018 2019
source : Xerfi

41. STEP 1. How to Capture
PC Market?
RECOMMENDATIONS
A. Introducing PC’s more affordable than
Assembled PC’s
A. Set Up Manufacturing plant in Ethiopia
a. ($38-$60 Per month Labour cost, compared
to $355-$410 in China)
b. $0.065/kWh Local Energy

42. C. Opening New Lenovo Stores
Countries Stores Available No. Stores by 2020
South Africa Distributor Network 1500
Nigeria Distributor Network 1000
Ethopioa Distributor Network 500
India 7000+ 9000+
Pakistan 2755 3500+
Bangladesh Distributor Network 2000+
RECOMMENDATIONS

43. STEP 2. How to Become
a Leader in Mobile
Market?
A. Acquiring Xiaomi
A. Build a low cost < $100 Phones
RECOMMENDATIONS

44. B. Introducing smartphones with local
languages interface
Countries Illiteracy Rate Population(million)
Kenya 22% 48
Nigeria 41% 190
Ethopia 50% 103
Bangladesh 40% 164
Pakistan 45% 195
India 28% 1.33 Billion
Source: Illiteracy rate- UNESCO, Population- Worldometers.com

45. Focus on emerging countries in
APAC will contribute revenue of
$ 12 Bn in 2020
APAC sales will grow 13.7%
YOY

46. 3.2. Structure of Competition Market share
… having increasingly gained market share, taking over competitors
Market share of selected PC makers (2009 - 2015)
unit: %
25%
CHINA’S LENOVO OVERTOOK HP IN THE SECOND
QUARTER OF2013 TO BECOME THE WORLD’SNUMBER
ONE PC MAKER.
20%
15%
10%
5%
0%
2009 2010 2011 2012 2013 2014 2015
Source: Xerfi Global with Gartner and IDC

47. Conclusion
• Lots of Chinese competitors
• Most of rivals want to have a stranglehold on the
Chinese markets (PC / smartphones)
• Diversification of products is less strategic than
focusing on the Chinese market
• Lenovo remains the PC leader in China and in the
world → WHY ?

48. Reference
• http://www.lenovo.com/ww/lenovo/pdf/Lenovo_CCE_Press_release_(Eng).pdf
• https://www.theguardian.com/business/2016/dec/10/china-trade-war-trump-tariffs-exports
• https://docs.google.com/presentation/d/1CnAMMzYPZBF_0P1FADXuT7zl4Sgw1o2jvMnOUU36vtg/edit#slid
e=id.p36
• http://knowledge.wharton.upenn.edu/article/when-it-comes-to-low-cost-labor-is-ethiopia-the-new-china/
• https://aijcrnet.com/journals/Vol_3_No_2_February_2013/1.pdf