China`s Economy

After entering into the World Trade Organization, China’s economy will deeply and broadly get involved in international division of labor. To develop and establish a stable foothold in the competition, Chinese enterprises should learn and grow in the face of competition and challenges. Chinese enterprises have also realized it and explored reasonable international strategy for their development and management. Some outstanding Chinese enterprises have used mergers, acquisitions or strategic alliance with foreign companies to achieve the dream of being multinational corporations. The most representative enterprise is the Lenovo Group. Based on analysis of the international road of the Lenovo Group, the report is aimed at discuss Chinese enterprises’ choice of internationalization. The structure of the report is described as follow: Firstly, it introduces the background of global PC industry and the Lenovo Group. Secondly, SWOT and PEST model are used to analyze internal and external environment of the Lenovo Group. Motives of Lenovo to go international are listed in third part. Fourthly, chooses Japan to expand its international markets and analyzes the Lenovo Group’s entry model. Then the report will give advice of Lenovo’s international competitive strategy. Recommendations and conclusion will be given in the last part.
1. The background of Lenovo Group

Lenovo group was established in 1984, it was originally invested by Chinese Academy of Sciences and it was called ‘Legend’. It is a highly innovative, international technology company formed by Lenovo and the former IBM Personal Computing Division. Lenovo Company mainly produces desktop computers, printers, projectors, laptops, mobile phones, servers, and other goods. In a very first stage, Lenovo have to occupy the most domestic market share in China, changes from single product to wide range products. In the one hand, Lenovo made its business to meet specified customer needs, changes from product model to solution model. In the other hand, Lenovo increased its service range, changes from value added service to a full standard service. Moreover, the three stages of transformation enhanced its business integration and improved their competitiveness. In 1996, Lenovo ranked No.1 in China’s domestic market, along with its rapid development in recent years. Then in December 2004, Lenovo purchased IBM’s personal PC business in a total price of $1.25billion dollars. The IBM personal PC business integration helps Lenovo to gain experience, especially in new product development, talent reserves, management and sales. Moreover, these insist the transformation of Lenovo from a local enterprise to become multinational corporations.
2. The internal and external environment of Lenovo
Business environment consists of the internal and external forces under which the organization operates (.Stephen, 1997). It shapes the abilities of enterprises in order to keep successful relationships with their customers. Successful enterprises pay more attention to constantly watching and adapting to the changes of the business environment (Richard, 2003). Generally speaking, most enterprises can control their internal environment such as customers and suppliers, but external environment is uncontrollable, such as political factors, economic factors etc. In order to gain the unbeatable position in the market, enterprises must strive hard continuously to adapt to the changes in the external environment (Zhao, 2004). SWOT and PEST analysis are effective tools to monitor and evaluate the internal and external environment of companies.
Strong market share
Lenovo has a prominent advantage on market share in Asia- Pacific PC market (not including Japan). Figure 1 shows the data about market share in the PC market of Asia in 2007. In the one hand, Lenovo’s market share is dominant compared to other competitors like Dell and HP in Chinese PC market. The Lenovo Group reached a new height of 34.5 percent in the fiscal year 2007, and achieved 24 percent year on year growth in PC shipments (Lenovo Group, 2008). In the other hand, Lenovo is one of the leading brands in China and has maintained this leading place for over 10 years. Lenovo can fully understand the local consumers’ needs as a localized enterprise and adapt to the market changes successfully.
Figure 1
Source: Internet Data Center
Brand advantage
The strong market share enhances the brand image of the Lenovo Group. In the PC market, the leadership of Lenovo has exceeded many other competitors in China, and is in an industry leader position. Since Lenovo has acquired the IBM’s PC operations, the advantage of Lenovo’s Dual-brand strategy appeared increasingly. The company could use the ThinkPad brand on existing Lenovo products. Therefore, a strong brand portfolio of Lenovo laptop was established in the domestic PC market, and it has taken a complete coverage of business and consumer market. The brand influence is improving gradually. In addition, Lenovo plays a leading role in cost control and Channel Architecture as a domestic enterprise in China. The Group is able to adjust its strategies and directions to the market development and pass its products’ consumptive value to consumers quickly in order to have the advantage of time difference.
Small market share in global PC market
Although Lenovo has achieved great success in China, the market share of Lenovo in the global PC market is still very little. Market share is a comprehensive reflection of the products competitiveness. The performance of Lenovo in America and Europe is very unstable. Lenovo lags far behind Hewlett-Packard in the global PC market share. And the gap of international operational experience between Lenovo and Dell is much bigger in the US market. It will be difficult for Lenovo to catch up with Dell and HP.
Lack of scale
The Lenovo group is lack of scale to compete with its major competitors effectively. Table 1 shows the revenues and unit PC shipments of the major competitors in the fiscal year2009. It is easy to find that Lenovo falls behind its competitors.
Table 1(million)
Unit PC shipments59403725
Source: Lenovo Group, Ltd.2010
Laptops and desktops are the main products of Lenovo, but its competitors have a wider range of product portfolio. For example, Acer offers the products including notebook computers, PCs, liquid crystal display (LCD) monitors, and high-definition televisions etc. HP has various kinds of products and service, such as PCs, imaging and printing-related products and services, and technology services (Lenovo Group, 2010). Although it has expanded the product portfolio with Lenovo mobile, Lenovo needs to expand its products and service continually. Because the weak scale of the group will limit and affect its operating performance.
Growing PC demand
The global PC market is expected to grow rapidly in the future. With the rise of the notebook market and the popularity of PC, the consumer market will show annual growth in geometric progression. And small-medium business segments of the PC markets are also expected to drive the growth. Table 2 shows the data about the demand of PC markets from 2007 to 2010. It can be seen that the demand of PC growth rapidly from the year 2007.
Table 2
Global PC shipments250 million350 million
Consumer segment120 million170million
Small-medium business55 million80 million
Source: Lenovo Group, Ltd.2010
Lenovo plays a leading role in global PC market, and the brands of PC products include IdeaCentre, IdeaPad, Essential, ThinkPad and ThinkCentre. Positive outlook for PC market will contribute to steady revenue flows for the Lenovo group in near term. This is no doubt that providing a good opportunity for the development of Lenovo in consumer market. Lenovo can be in a good position to benefit from the growing PC demand.
Olympic strategy
It is the best opportunity for Lenovo to break into the global market. Lenovo has many sports marketing cases in past few years, including signing a contract with the World Player, and cooperating with NBA. It also sponsors F1 Williams. Lenovo’s Olympic marketing is the most impressive and prospective strategy. Relying on the various advantages of Olympic sponsor, Lenovo can appeal to the public’s attention from the Olympic to the Lenovo’s products. It will help Lenovo enhance the brand image and awareness.

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