Lenovo Report

In: Business and Management

Submitted By greatgates
Words 80647
Pages 323
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Lenovo Wacc

...Lenovo Group Limited Background: Lenovo Group Limited is a technology company that is principally engaged in the sales of personal computers, tablets, smartphones and other cutting-edge technology. It is the global leader in personal computer sales.i While it operates in over 160 countries, 38% of its sales (over 68% of adjusted pre-tax income) come from China.ii Lenovo trades on the US OTC market (LNGVY) at $31.10 a share and trades on the Hong Kong stock exchange (0992:HK) at HKD11.94 a share. Its total market capitalization as of 9/19/2014 is about $16.2B with around 520.4M shares outstanding. Lenovo operates in over 160 countries and has a global headcount of 54,000. Lenovo breaks its performance into four geographic regions in its annual report: China, Asia Pacific (AP), Americas (AG), and Europe-Middle East-Africa (EMEA). In the fiscal year ended March 31, 2014, China accounted for 38% of total revenue, AP accounted for 16% of total revenue, AG accounted for 21% of total revenue, and EMEA accounted for 25% of total revenue. Additionally, revenue is broken up as follows: 51% is in notebook sales, 28% is in desktop sales, 15% is in mobile internet devices, and the rest is in other areas.iii Cost of Equity: Re=Rf + CRP + β (MRP) = 2.59% + .90% + .76 (3.07%) = 5.82% To calculate Lenovo’s cost of equity, I used a method of CAPM in which I added a country risk premium to the standard CAPM equation. Rf =2.59% In order to maintain consistency between cash flows and the risk......

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...LENEVO – BUILDING A GLOBAL BRAND Why did IBM want to sell its PC business? Why did IBM sell to Lenovo? Some of the main reasons why IBM decided to sell its PC business in the year 2004 are as follows, 1. UnprofitableOperations 2. MaturedPCMarket 3. Focusonservices Unprofitable operations: IBM experienced a great loss in its PC business between the period 2002 to 2004. The company lost almost one billion dollars selling personal computers during that period even after outsourcing most of its PC manufacturing in the year 2002. Also IBM failed to protect its PC intellectual property when the company outsourced its processor and OS development activities to Intel and Microsoft respectively. This allowed Intel and Microsoft to emerge as vigorous competitors for IBM, which in turn impacted IBM’s market share. This clearly indicates that IBM’s operational activities were not up to the mark. Matured PC Market: Many leading competitors started slashing the PC’s price and the average price of the PC system kept decreasing by 6% every year. Since IBM’s product were more innovation oriented, the company could not sell the premium product for a cheaper price. This scenario also increased the market share of leading vendors at the expense of IBM. IBM considered that the PC’s were more and more at the fringe. Clearly, IBM did not want to trade off the brand image by selling PC’s for cheaper price because of the saturating market. Focus on Services: IBM was getting out of the PC......

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...customers can be a source of advantage. Dealing with the sophisticated and demanding customers at national with low cost computers since 1996 and current domestic leader in PC industries in China. Huge market (half population of the world: China and India, and aggressively growing economy with double digit economic growth) [3] Related and Supporting Industries: Local clusters of related and mutually supporting industries is main advantage. Regional based and personal interaction easy and effective. Strategic alliance of Lenovo with TCL in china and IBM in U.S. [4] Firm Strategy, Industry structure and rivalry: Firms strategy to invest in technical excellence in IT industry, Competitive local industry structure & strong rivals with IBM based on government policy Lenovo had achieved USD 1.6 billion in sales accounts 45% of their total worldwide sales even with economic downturn. Its market share rose last year at 1.8 % to overall of 30.5 % (Lenovo Corp, 2009) National Disadvantage No disadvantage from its China base. But there is no replacement plan when China increases its labor price which is likely to be in the near future. Example: The case of Apple manufacturing unit in China. (21 people committed suicide due to work pressure till June 2009). (Source BBC, 9 June, 2010) Also, in the sigma associated with Chinese products with a reputation skimping on quality to achieve low cost which mistrust the customers. In the light of the CAGE framework and......

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...When we talk about Lenovo, IBM is an inevitable subject. This company is definitely one of the most famous computer firms in the world. The company has got a nickname "big blue" for its innovative culture and the product branding. In 1981, IBM has introduced its first PC to the market. In 1992, ThinkPad series and ThinkCenters began to enter the market, which has gained a very good reputation by its quality service and innovative design. In December 2004, the PC division of IBM including the "Think" series was sold to Lenovo Group, which is the biggest PC manufacturer in China. This acquisition has been considered as an important step for Lenovo's going global. Today, Lenovo has become one of biggest PC makers in the world. ▪ Important Issues 1. the global market outside of China Lenovo has been the leader in Chinese PC market since 1996. It announced the entering into global market by taking over IBM PC in 2004. If we look at Lenovo's annual reports of the recent years, about half of the sales have always been completed in China. Although Lenovo has got a quite good performance in this biggest PC market in the world, in other countries, the influence of this brand is still limited. taking the world's second PC market - America for example, after IBM PC has been sold, the five biggest PC market share became HP, Dell, Apple, Toshiba and Acer. Lenovo has not been able to entered the main PC market in US yet, while IBM has already quit the competition. Table 1: Top......

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...COURSE: MKT. 2500*08 Semester: Spring 2010 Professor: Prof. Vaccaro Company Name: Lenovo Group Limited STUDENT NAME& EMAIL& PHONE #: LENOVO CASE PAPER For Principles of Marketing MKT. 2500 With Citations & References Table of Contents I. Background a. The Industry b. The Company c. Product/Services d. Target Market II. Key Issues/Problems III. Alternative Solutions a. Alternative #1 b. Alternative #2 c. Alternative #3 IV. Key Recommendation Ⅴ. Bibliography/References Pg. 3-5 Pg. 3 Pg. 3-4 Pg. 4 Pg. 5 Pg. 5-8 Pg. 9-10 Pg. 9 Pg. 9 Pg. 10 Pg. 11 Pg.12 I. Background a. The Industry “The global PCs market has seen a shift in consumer preference to the budget range PC, from the PC at the cutting edge of technology. Consequently, despite increasing volume sales, the majority of PC markets have lost value in recent years. Strong growth in the Asia-Pacific markets have somewhat buoyed the global market. The global PCs market reached a value of $142.9 billion in 2003, having grown with a compound annual growth rate (CAGR) of 0.7% in the 1999-2003 periods. The leading revenue source for the global PCs market in 2003 was the desktop sector, which accounted for 69.3% of the market’s value. In value terms, this sector was worth $99 billion in 2003. During the next five years, the market is expected to experience steadily......

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Lenovo Market Report

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