Strategic position analysis and strategy evaluation of a Chinese Essay

Strategic position analysis and strategy evaluation of a Chinese organisation - Essay Example It has controlled the business desktop market and PC market with 87 percent of market purchasing desktops and 84 percent PCs from China manufacturers in 2006 (Salter, 2012). Started out in 1984, it is the largest computer manufacturer within China while second largest globally. The name Lenovo, coined in 2004, is a combination of ‘Le’, meaning ‘legend’ and ‘Novo’ which means ‘new’. As the name depicts, the new legendary organization was formed with mission to introduce new and unique products in markets (Liu, 2012). This was followed by the acquisition of the PC Division of IBM in 2005. Acquisition of a company, that was the inventor of the personal computer industry in 1981, lent credibility to Lenovo and enhanced customer exposure. In 2006, Lenovo attained and set up important investments and centers in China and launched its brands outside of China for the very first time. The entire computer business industry in China flourished from $660 billion in the year 2004 to $779 billion in 2007 (Lenovo, 2013). In this paper we critically analyze the strategic position of the company in the relevant industry as opposed to its major competitors and use different tools to assess its performance over the years. LENOVO’S STANDING IN THE INDUSTRY Lenovo deals mainly in manufacturing of laptops, desktops, ultra-books, tablet PCs and other computer accessories such as headphones, microphone, mouse, keyboard, monitors and server machines etc. It achieved a 19 percent share in the world of computers and notepads. Dell and HP account for 21% and 54% of the whole market respectively. As of today, HP is the market leader in manufacturing of PCs, followed by Lenovo, Dell and Acer (Sun, 2012). Few years back, Lenovo was a heavy loss-making concern in 2008; with turnaround performance, today it is a profitable venture flourishing as we speak. However it did so not through implementation of new strategies; instead, it focus ed on toughening the areas where it needs strength and relied on tried and trusted solutions instead of investing into new experimental measures. It is in a rapid expansion mode and has introduced a new strategy, namely ‘PC+’ whereby it shall depart from its core competence of manufacturing PCs and shall diversify horizontally into other type of devices such as mobile data technology without affecting its current products where it excels. Currently, Lenovo is the second largest manufacturer of PCs, holding 13.50% of market share after HP which holds 17.70%, and has a stable sales growth rate of 30%. However, its profits are growing less than proportionate to the industry trend. The market share of Lenovo in PCs sector is growing while those of Dell and Acer are getting lower. Analysts are of the view that soon it shall outperform HP in near future considering its growth rate of 16.6% as shown in 2011. Within China, which serves as home to Lenovo, it holds a market share of 28.80% only which is although the highest but can be easily improved through knowledge of local conditions and cost-reduction programmes. Revenue generated from Chinese markets constitute to 42% of the total sales made annually by Lenovo across the globe (Singh, 2013). The company has a lack of profitability growth which it should counter through economies of scale and innovation. Innovation has always been Lenovo’s saving grace and the amount of research and development budgets and expenditures allocated to this head define how the