Lenovo Case Analysis

Key Problem In 2014, Lenovo, as the world’s largest PC maker, expected to gain profits from the investment of the acquisition of the Motorola Mobility handset business as they did to the acquisition of IBM’s Personal Computing Division ten years earlier; however, the results did not meet the expectation. The key problems are that Lenovo confronted with the annual 5% shrinking in sales in the PC industry and strong competition in the local and international smartphone market. With more and more new local entrants, Lenovo dropped their position in the China market from the 2nd to the 11th between 2014 and 2016. While competing in the international market, Lenovo shrank its market share from 13% to 4.6% in 2016. Yang Yuanqing, the Chairman,

By offering a strong ecosystem of devices, Lenovo can price their product with a higher price due to the completed services. Although there will be a switching cost for the customers, with a strong integration system, the downside can become an advantage to lock the consumers and gradually generate the loyalty to the brand.

Also, Lenovo has the resources of building its ecosystem to integrate their products. First, with several acquisitions, Lenovo became the worldwide dominant in the PC market, which brought them a steady growth revenue. Although the PC market growth rate was low, it was still a cash cow business, which remained a large market share to generate steady large profits and it acted as a cash resource to support the investment in R&D to build the innovative devices and cloud connectivity system as well as the intensity in the smartphone market. In addition, the acquisition of IBM’s x86 server business gave Lenovo technical support for developing the cloud business, which grew drastically from 1% to 10% of the revenues from 2014 to

Although there were many new local entrants, which positioned in the low-end market and grabbed the market share from Lenovo, Lenovo should focus on the high-end market and build their brand loyalty by integrating product portfolios to achieve cross-product synergies. Although the high-end brand line, the Moto brand failed in the modular design, it remained its worldwide brand awareness from its old brand Motorola and helped Lenovo to launched global markets easier compare to the other Chinese local competitors. By modifying the designs after realizing customer’s need for consistency of devices, Lenovo has the strong competitive advantages in brand awareness. Also, as the first mover of the Phab smartphones, Lenovo has a power to set the barrier to entry to keep the market shares and also to set a high price for the innovative devices focusing on the high-end