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MARKETING

ON

PROJECT

COMPUTER INDUSTRY

Submitted by: Sushil Kumar JIML-10-151 Vivek Dubey JIML-10-170

Submitted to:Dr. REETI AGARWAL

Surpreet Singh JIML-10-FS-046 Tapas Kumar Pal JIML-10-162 Utkarsh Pratap Singh JIML-10-174

Acknowledgement
We take immense pleasure to acknowledge the efforts of the following people who helped our group to make this project a reality. We express my gratitude for their suggestions, guidance and intellectual influence. We express our sincere thanks to Dr Reeti Agarwal, Core Faculty, for making this project a reality. We are thankful to all our Lecturers for their help and kind co-operation throughout the course. Last, but not the least, I would like to thank our parents and friends who always supported in all our endeavors.

Industry Overview

The impact of the global economic crisis in 2008 reached far and wide. It has significantly affected the worldwide PC market demand as many large enterprises delayed purchase decisions and reduced IT budgets. Even the growth of the China PC market has slowed down under the economic challenges. At the same time, the PC industry as a whole has shifted dramatically and rapidly to lower price points, imposing additional pressures on industry players. During the 2008/09 fiscal year, the year-on-year growth of worldwide PC market shipments decelerated to approximately 4 percent mainly supported by consumer and low-priced notebook segments. The China PC market and worldwide commercial PC segment in which Lenovo is heavily weighted showed significant slowdown in the second half of the fiscal year under the economic crisis. In addition, the Group could not enjoy the benefits of the growth in transaction space as it has not adequately addressed the worldwide transaction segment outside China, in particular the consumer market. Lenovo reported lower-than-market growth in its worldwide PC shipments which only increased by approximately 2 percent year-on-year. As a result, the Groups market share decreased slightly to 7.6 percent, ranking number four worldwide during the fiscal year. The Groups financial performance in the second half of the 2008/09 fiscal year was significantly impacted by the widespread economic slowdown. Lenovos overall sales for the fiscal year decreased 9 percent year-on-year to approximately US$14,901 million, resulting from the slower PC shipment growth and a steeper-than-normal decline in average selling prices exacerbated by the weak economic backdrop. The Groups gross margin performance was further affected by the continued shift in the market to lower price points, aggressive pricing and currency fluctuations. The gross margin (excluding one-off items) for the fiscal year declined to 11.9 percent from 15.0 percent while gross profit (excluding one-off items) decreased 27 percent yearon-year to approximately US$1,779 million. In anticipation of continued deterioration in the global economic environment, Lenovo announced a global resource restructuring plan in January 2009 to reduce costs and enhance operational efficiency. About 2,500

employees were eliminated as a result of this action which is expected to realize annual savings of approximately US$300 million on a run rate basis in the coming fiscal year. Despite Lenovos efforts to control expenses during the 2008/09 fiscal year, the decline in sales and pressure on gross margin resulted in 95 percent year-on-year decline in the Groups profit before taxation (excluding the cost of restructuring actions and one-off charges) to approximately US$29 million for the year. The Group reported a loss attributable to shareholders of approximately US$226 million, after accounting for US$146 million of restructuring costs and US$71 million of one-off charges. This compared to a profit attributable to shareholders (including US$20 million net profit from discontinued operations) of US$484 million in the previous fiscal year.

Vendor highlights
Hewlett-Packard (HP) made further inroads into consumer portables through the retail channel and continued to gain share overall. The vendor's shipments grew 3.6% on year worldwide with above-market performance in the US. The company also performed well in Europe and Asia Pacific. Although still heavily affected by the commercial slump, Dell saw good growth from consumer-focused SKUs and reclaimed the number one spot in the US. The company continues to restructure operations, develop its consumer business, and should benefit from an eventual rebound in the commercial segment. Acer continues to capitalize on its growing channel presence to ship portables geared toward a wide range of cost-conscious consumers. The company maintained its lead in mini notebook PCs while its early entry into Atom-based netbooks should also pay dividends later in the year. The company saw a significant gain in the US market, likely benefiting from the troubles of Dell and Lenovo. Lenovo's renewed focus on notebooks and emerging regions produced positive growth following declines in the past two quarters. Solid growth was reported in Latin America and Asia Pacific market excluding Japan, while yearly declines in mature regions slowed

compared to the first quarter of 2009. Its home court advantage in Asia Pacific market excluding Japan also has led it to focus on a myriad of government stimulus programs, which could pay dividends while riding through the commercial downturn. Toshiba had a solid second quarter where it outgrew the market in most regions and moved up to the fourth spot in the US. Toshiba's mini notebook offering has helped it to weather the storm comparatively better than other Japan-based OEMs and it was the only major Japan-based OEM to have positive yearly growth in Japan.

Top five vendors worldwide PC shipments


IDC: Top-5 vendors' worldwide PC shipments, 2Q09 (k units) Rank Vendor 1 2 3 4 5 HP Dell Acer Lenovo Toshiba Others All Vendors * PCs include desktop and portable PCs (including mini notebooks), but exclude x86 servers. Source: IDC, compiled by Digitimes, July 2009 2Q09 shipments Market share 2Q08 shipments Market share Y/Y 13,095 9,108 8,431 5,757 3,494 26,407 66,291 19.8% 13.7% 12.7% 8.7% 5.3% 39.8% 100% 12,644 10,984 6,815 5,596 3,163 29,202 68,403 18.5% 16.1% 10% 8.2% 4.6% 42.7% 100% 3.6% (17.1%) 23.7% 2.9% 10.5% (9.6%) (3.1%)

India Client PC (Desktop + Notebook) Shipments: Top 3 Vendor Market Shares (% of units), 4Q 2008 vs. 4Q 2007*

4Q

07

Client

PC

Shipments 4Q Vendor

08

Client

PC

Shipments

(Notebook PCs + Desktop PCs) Vendor Hewlett-Packard HCL Lenovo release Market Share 17.6% 10.8% 8.9%

(Notebook PCs + Desktop PCs) Market Share 15.6% 10.9% 9.6% Hewlett-Packard Dell HCL

*According to IDCs India Quarterly PC Tracker 2008, 4Q 2008 quarter, March 2009

PC Shipments Market Share


4Q 2008 PC Shipments 1Q 2009 PC Shipments

(Desktop PCs + Notebook PCs) (Desktop PCs + Notebook PCs) Vendor Hewlett-Packard Dell HCL Infosystems Acer Lenovo Market Share 15.6% 11.0% 9.6% 7.7% 6.6% Vendor Hewlett-Packard HCL Infosystems Dell Acer Lenovo Market Share 18.2% 9.8% 9.7% 7.3% 4.7%

PEST analysis

1. Political (inc. legal)

Political factors include government regulations and legal issues determining the conditions under which companies have to operate. In this field, the computer industry has to face certain restraints. Problems can arise in countries where political stability is not guaranteed, no matter whether companies operate production facilities or if they do business with the country through exports. Many countries still have restrictive policies which are maintained to protect domestic manufacturers and production. Such policies often hinder foreign companies from entering into this market. The only possibility to do business in those countries is to establish partnerships with local companies, where they are additionally forced to accept minority shares and to provide money and technological know-how. However, the computer industry sees great potential in those countries which lose their restrictions. This is especially true for China which has opened for many industries since its accession to WTO in2001. In the course of globalization trade barriers decline and new markets emerge, allowing free trade to expand.

2. Economic
The computer industry expects a growth of approximately 10 percent over the next years. This growth is influenced by the economic situation in a specific country, having an impact on the purchasing power of potential customers. Additionally, changing inflation rates and currency fluctuation also determine the profitability of a company.

3. Social
The national demand for computers is dependent on the educational level prevailing in a specific country. The higher the educational standard, the higher is the demand. Furthermore, computers get more and more involved in daily life. Today, children already get familiar with the use of computers at a very young age, representing a generation that will hardly live or work without a computer in future. Additionally, the brand image of a computer and lifestyle trends get more and more decisive for the purchasing decisions. The computer industry adapts to this trend, e.g. by offering a wide range of notebooks and by trying to create a strong brand name.

4 Technological
There is hardly any industry that is characterized by a faster technological development than computer industry. Increased research and development have caused permanent innovation processes which lead to short product life cycles resulting in a faster depreciation of the products.

5 Market structure

The computer industry is characterized by a quasi-oligopolistic structure. It is dominated by 5 major global players although there are a lot of small companies which often serve only regional markets. The following graph illustrates the division of the computer market of each individual company. Company HP DELL LENOVO ACER TOSHIBA OTHERS Market share 18.1% 15.6% 7.8% 9.4% 4.4% 44.7%

Market Share of various players in PC Industry


HP, 18.10%

OTHERS, 44.70% DELL, 15.60%

LENOVO, 7.80% TOSHIBA, 4.40% ACER, 9.40%

Industry Profile
In India, the software boom started somewhere in the late 1990s. Most of the Indian software companies at that moment offered only limited software services such as the banking and the engineering software. The business software boom started with the emergence of Y2K problem, when a large number of skilled personnel were

required to fulfill the mammoth database-correction demand in order to cope up with the advent of the new millennium. The profile of the Indian IT Services has been undergoing a change in the last few years, partly as it moves up the value chain and partly as a response to the market dynamics. Ten years ago, most US companies would not even consider outsourcing some of their IT projects to outside vendors. Now, ten years later, a vast majority of US companies use the professional services of Indian Software engineers in some manner, through large, medium or small companies or through individuals recruited directly. The market competition is forcing organizations to cut down on costs of products. The professional IT services on the other hand are becoming increasingly expensive. The offshore software development model is today where onsite professional services were ten years ago. There is a high chance (almost a mathematical certainty), that in less than ten years, the vast majority of IT services (software development being just one of them) from developed countries, will be, one, outsourced and two, outsourced to an offshore vendor. Despite the global economic slowdown, the Indian IT software and services industry is maintaining a steady pace of growth. Software development activity is not confined to a few cities in India. Software development centers, such as Bangalore, Hyderabad, Mumbai, Pune, Chennai, Calcutta, Delhi-Noida-Gurgaon, Vadodara, Bhubaneswar, Ahmedabad, Goa, Chandigarh, and Trivandrum are all developing quickly. All of these places have state-of-the-art software facilities and the presence of a large number of overseas vendors. Indias most prized resource is its readily available technical work force. India has the second largest English-speaking scientific professionals in the world, second only to the U.S. It is estimated that India has over 4 million technical workers, over 1,832 educational institutions and polytechnics, which train more than 67,785 computer software professionals every year. The enormous base of skilled manpower is a major draw for global customers. India provides IT services at one-tenth the price. No wonder more and more companies are basing their operations in India.

The industry is in an expansion mode right now, with dozens of new offshore IT services vendors emerging every day, the industry has a high probability of being subjected to the 80:20 rule in not too distant a future. In perhaps another ten years, 80 percent of all outsourced offshore development work will be done by 20 percent of all vendors, a small number of high qualities, trusted vendors. Only a few select countries and only the most professional companies in those countries will emerge as winners. India will definitely be the country of choice for offshore software development. It has the potential to become and remain the country of choice for all software developments and IT enabled services, second only to the USA. The third choice could be far distant. India is among the three countries that have built supercomputers on their own. The other two are USA and Japan. India is among six countries that launch satellites and do so even for Germany and Belgium. India's INSAT is among the world's largest domestic satellite communication systems. India has the third largest telecommunications network among the emerging economies, and it is among the top ten networks of the world. To become a global leader in the IT industry and retain that position, India needs to constantly keep moving up the value chain, focusing on finished products and solutions, rather than purely on skill sets and resumes. It also needs to be able to package its services as products, rather than offering them as raw material. It needs to be able to recognize and build up on its strengths and work on weaknesses. Another extension of the IT industry is the ITES (Information Technology Enabled Services) which is a sector dependent on IT sector. Information technology consulting (IT consulting or business and technology services) is a field that focuses on advising businesses on how best to use information technology to meet their business objectives. In addition to providing advice, IT consultancies often implement, deploy, and administer IT systems on businesses' behalf. The PC industry is one of the strangest in the world. There is probably no other type of product that is so technologically sophisticated, sells for so much money, and yet

is sold by so many companies for so little profit. The severe competition in the industry is the #1 reason why so many problems are encountered by those who deal with PC vendors. While I consider there to be absolutely no excuse for a company not treating its customers fairly, at the same time I think customers should have some idea of what vendors are up against in this demanding marketplace.

Features of the Industry


It Is Very Price Competitive: By far, the most important thing to remember about the PC industry is this: it is one of the most competitive in the world. The main reason for this is the simple fact that making a PC is just not that difficult. Most are assembled from standardized components and not a lot of expertise is required. There are few barriers to entry to the market, meaning it is easy to set up a new PC company. As a result, there are tens of thousands of companies making PCs that perform similar functions. This causes the market to be extremely price-competitive. Most of the other characteristics of the industry follow directly from this fact. Systems and Components Sell with Low Margins: Since the market is so

competitive, vendors often sell at very low margins. Computers aren't like many other products, where the company selling the device is making upwards of 50% of the price of the product as gross profit (meaning, profit before overhead and general expenses). For PCs it is more like 10% or less. Many people buy a $1500 PC thinking the vendor is making, say, $500-700 on the item, and they find it hard to understand why these companies aren't getting rich. It's more typical for the vendor to make less than $100 profit on such a PC. Some small companies make virtually no profit at all on straight PC sales, and survive on post-warranty support and consulting! The Market Experiences Rapid Price Fluctuations: There is probably no

other industry that has prices change as dramatically and frequently as the PC

industry. Usually, prices are decreasing. This is good for the consumer but very bad for vendors, because it means that their already low margins get squeezed if prices drop between the time that they buy a product and the time they sell it. It's not unheard of for a vendor to buy a component wholesale at price $X and find 24 hours later that the retail price has dropped below $X! The vendor must then try to dump the product as fast as possible to limit his losses. You won't find many industries where this occurs with regularity. Vendors Keep Low Inventories: In an environment where margins are low

and prices are generally dropping, keeping high inventory is a death sentence-whenever prices drop the vendor potentially loses money on every component in inventory at the time. For this reason, most companies try to keep as little in inventory as they can get away with. Vendors Contend with High Bankruptcy Rates: Because of all the

challenges involved in running a PC business, the bankruptcy rate is high. Many vendors have been in business only a short time. Some open a store, have it fail, and then open another one with a new name, sometimes year after year. The structure of PC industry is almost unique. The original equipment

manufacturers (OEMs) that produce and sell PCs bear most of the risk, while the downstream suppliers of components make most of the profit. Many analogies have been drawn with other mature-product industries, such as automobiles, but we find such comparisons inaccurate. The key difference is that the suppliers of PCs are struggling to identify meaningful differentiation vs. competitors. This leaves manufacturers competing primarily on price, which exacerbates the pressure on margins. The airline business presents a more realistic comparison. Aircraft manufacturers and airports are profitable and continue to benefit from growth in demand, but the carriers are struggling and further consolidation is viewed as inevitable.

Although the apparent inability to differentiate products drives the PC industry's focus on price competition, the downward movement of pricing is also because of oversupply. There are too many suppliers, all struggling with similar challenges in this highly cash-intensive business. We continue to observe fire sales resulting from overproduction and price-led promotions by PC suppliers looking to accelerate cash flow or boost market share. The result is an industry which, in some market segments, seems locked into a "race to the bottom" in the pricing of products. Clearly, this trend is unsustainable. In November 2004, these observations, combined with our market expectations for 2006 through 2008, led us to predict that by 2007, three of the top 10 PC suppliers would exit the market. Within weeks, IBM announced the sale of its PC Division to Lenovo Group. Our market analysis was straightforward. Unit growth between 2006 and 2008 will average about 6 percent, but revenue will remain flat. Key PC component suppliers, such as Intel and Microsoft, have historically been highly adept at maintaining their PC revenue, and their overall revenue from PCs will probably continue to grow as the market continues to shift toward mobile PCs. This leaves PC suppliers facing the prospect of producing more PCs for dwindling revenue. This situation will inevitably lead to further consolidation among the leading suppliers. The impact of consolidation will not be limited to PC suppliers. Intel, AMD, Microsoft and other component suppliers will also see change as the structure of their market evolves. Although these changes will ultimately result in a healthier PC industry that is better able to equate innovation to sustainable business, the period of adjustment will bring additional challenges to the buyers and users of PCs. Choice of supplier and continuity of supply will be less certain, while the adoption of emerging PC technologies will present additional risk. This collection of research further explores the analysis behind these observations and examines the likely impact for PC suppliers, key component suppliers and the buyers of PCs.

Major Players in the PC Industry

1.
The Hewlett-Packard Company commonly referred to as HP, is the largest PC manufacturer in the world. The company was founded by Stanford University classmates Bill Hewlett and David Packard in 1939.It is headquartered in Palo Alto, California, United State and operates in more than 170 countries around the world. HP specializes in developing and manufacturing computing, storage, and networking hardware, software and services. HP is a Fortune 500 company and is ranked 9 in 2009. In august 2001, HP and Compaq came together to merge by a 25 billion$ stock deal. The company employs 321,000 people as on 31st December, 2008. Mark V. Hurd chief executive officer and the chairperson of HP since September 22, 2006 has focused on maintaining the companies leadership in exploring how technology and services can help people and companies address their problems and challenges, and realize their possibilities, aspirations and dreams. Even in the poor economic conditions of 2008, the company had a net revenue growth of 13% from $104.2 billion in FY07 to $118.3 billion in FY08.

1.1 HPs Product Line


The company HP provides a wide range of products and services to its customers and is divided into six business segments:

Personal Systems: Hewlett-Packard is the world's largest manufacturer of personal computers, and its Personal Systems Group (PSG) is responsible for the

development and sale of HP's commercial and consumer PCs, workstations, handheld devices, digital entertainment systems, and other related services and accessories.

Imaging and Printing: Hewlett-Packard is the leading provider of imaging and printing systems in the world. HP's Imaging and Printing Group (IPG) provides consumer and commercial printer hardware, printing supplies, printing media and accessories, and scanning devices.

Enterprise Storage and Servers: HP is one of the leading providers of servers in the world, offering a wide range of servers and storage products and solutions for small businesses and larger corporations.

HP Services: This segment offers a large variety of information technology services, including technology services, consulting and integration services, and managed services.

Software: HP's Software segment provides management software solutions that assist large companies in managing their operations and information technology infrastructure,

HP Financial Services: Hewlett-Packard offers financing, leasing, and other financial management services for its larger enterprise customers, small businesses, and educational and governmental customers in order to allow its customers to purchase complete end-to-end information technology solutions.

The company sets its corporate objectives as: Customer loyalty Profit Growth Market leadership Leadership Commitment to employees Leadership capability Global citizenship

1.2 The SWOT analysis of HP


STRENGTH Leadership position Consumer centric brand Strong after sales service Design strategy: looks cost strategy OPPORTUNITY PC business Service industry: bought worlds No 2 Service provider EDS WEAKNESS Low flexibility: it does not have high customization available Decline in digital entertainment market Software service

THREAT Pricing pressure Component pricing Slow revenue growth

2.
Dell, a multinational technology corporation with its head quarters in Round

Rock, TX, USA develops, manufactures, sells, and supports personal computers and other computer-related. Based in Round Rock, Texas, Dell employs more than 82,700 people worldwide. Michael Dell founded the company as PC's Limited with capital of $1000 in 1984. He is the present CEO and chairman of the company. Operating from Michael Dell's offcampus dorm-room at Dobie Center, the startup aimed to sell IBM PCcompatible computers .Michael Dell started trading in the belief that by selling personal computer-systems directly to customers, PC's Limited could better understand customers' needs and provide the most effective computing solutions to meet those needs. The company changed its name to "Dell Computer Corporation" in 1988. Dell became the first company in the information technology industry to establish a product-recycling goal (in 2004) and completed the implementation of its global consumer recycling-program in 2006. Dell offers a variety of products and services. Among its offerings are a wide array of desktop and notebook computers, peripherals and software, technical support services, and corporate servers and storage systems.

2.1 Dells Product Line

PCs (60% of revenue) Dell produces several lines of consumer and commercial PC systems, including both desktop and notebook models. Overall, Dell holds about 14% of the worldwide PC market. Within the PC segment, desktops contributed 32% of Dells Fiscal 2008 revenue, and notebooks accounted for 28%. Software, Peripherals, and Accessories (16% of revenue) Dell sells various software programs with its PC systems, such as productivity software, security programs, and games. Dell also sells a number of computer-related peripherals, including LCD monitors, printers, input and storage devices, etc. Aside from PC-related items, Dell sells various accessories and electronic devices, such as LCD televisions, digital cameras, and MP3 players. Servers and Storage (15% of total revenue in 2008) For its corporate customers, Dell provides both servers and storage systems. Dell also sells customized servers and enterprise systems designed to meet the specific needs of certain customers. Technical Support and Services (9% of total revenue in 2008) Dell also sells technical support services for its products, providing customers with assistance after they purchase their systems. In Fiscal 2008, revenue increased 6% yearover-year to $61.1 billion, The company recorded net income of $351 million for the fourth quarter ended Jan. 30, a 48 percent drop from the $679 million it recorded in last year's fourth quarter. Net income per share was $0.18. Revenue fell to $13.4 billion, a 16 percent drop from a year ago.

2.2 SWOT analysis of Dell STRENGTH Inventory turnover rate is 6 days. Revenue growth at 100% Cost efficiency Direct to customer business model: minimum credit risk Latest technology customization Internet sales leadership: $5M Threat Dells market share is very less Price range considered premium Currently instability Tariff trade barriers fluctuation policy Weakness No proprietary technology High dependency on component suppliers Lack of software support for customers

everyday worldwide Opportunity Network service in B2B Strong potential in china and India Low costs and advanced technology Growth in business, education and government markets

3.

Acer Incorporated is a Taiwan-based multinational electronics manufacturer. Originally named Multitech, it was founded by Stan Shih , his wife Carolyn Yeh, and a group of five others in 1976. Multitech was eventually renamed Acer in 1987. Acer is renowned for the development and manufacture of sophisticatedly and intuitively designed, easy to use products. Focused on marketing its brand-name IT products around the globe, Acer ranks as the world's No. 3 vendor for total PCs and No. 2 for notebooks, with the fastest growth among the top-five players.

3.1 Acers product line


Notebook (71% of revenue): Notebooks are Acer's most profitable product, generating NT$417 billion in revenue in 2008. Within the past decade, growth in notebook sales has far outpaced growth in desktop sales. For example, in 2007, overall notebook shipments grew 33.8%, while desktop shipments grew only 4.8%. Netbook (9% of revenue): Netbooks are an emerging type of scaled-down portable computer, that are designed to be cheap, light weight, and easy to use. Acer is the #1 producer of netbooks worldwide by unit sales, with a 38% market share. Desktop (12% of revenue): Annual revenue growth in desktop sales has slowed from 50.2% from 2004 to 2005 to 3.8% in 2008 as consumers demand more laptops. The company expects desktop sales growth of 3-4% from 2009 to 2011. Display (5% of revenue): Acer manufactures LCD monitors, HDTVs, and projectors. In addition to consumers, the company is targeting businesses and governmental agencies for volume sales. Other (3% of revenue): Acer offers information security management, software systems development, data center services, and other IT support services. In addition, in 2008, Acer acquired E-Ten, a Taiwanese manufacturer of Pocket PC phones and PDAs.

3.2 SWOT analysis of Acer

STRENGTHS Operational Efficiency Tight Improved Economies of Scale Fast Reactions to Market Changes Aggressive Price Strategy

WEAKNESS Low Profit Margins Multiple Brands, Which Increase Costs and Dilute Resource Brand perception as Low-Cost PC Provider Insufficient Attention to the Chinese Market Largest in the World the Second-

Control on Overhead Costs

After Cautious ROI Evaluation Particularly Suitable to a Time of Economic Recession Strong global logistics OPPORTUNITIES Economic Downturn, Which Favors Low-Price Products Growth Into the Chinese Market Growth Markets Into Midsize-Business

THREAT Continued Price Decline in Mobile PCs, Due in Part to Mini-notebooks, Which Erodes Margins and profitability Dell's Expansion Into Indirect Sales Samsungs entering into consumer mobile PC s.

COMPANY PROFILE

Lenovo Group Limited is a Chinese-based multinational computer technology corporation that develops, manufactures and markets desktops and notebook personal computers, workstations, servers, storage drives, IT management software, and related services. Incorporated as Legend in Hong Kong in 1988, Lenovo's principal operations are currently located in Beijing, China, Morrisville, North Carolina in the United States, and Singapore, with

research centers in those locations, as well as Shanghai, Shenzhen, Xiamen, and Chengdu in China, and Yamato in Kanagawa Prefecture, Japan. Lenovo acquired the former IBM PC Company Division, which marketed the ThinkPad line of notebook PCs, in 2005 for approximately $1.75 billion. In 2009, Lenovo was the fourth largest vendor of personal computers in the world. The company is the largest seller of PCs in China, with a 28.6% share of the China market, according to research firm IDC in July, 2009. It reported annual sales of $14.9 billion for the fiscal year ending 2008/2009 (ending March 31, 2009). Lenovo markets its products directly to consumers, small to medium size businesses, and large enterprises, as well as through online sales, companyowned stores (in China only), chain retailers, and major technology distributors and vendors. On September 4, 2009, Ocean wide Holdings Group, a private investment firm based in Beijing, bought 29% of Legend Holdings, the parent company of Lenovo, for 2.76 billion Yuan ($404.1 million). Legend Holdings is the asset management unit of the Chinese Academy of Sciences. On November 27, 2009, Lenovo Group announced its intention to purchase Lenovo Mobile Communication Technology. Lenovo Mobile now ranks No.3 in Chinas mobile handset market.

Company History
The following is a brief history of Lenovo:

2000: Legend shares peak at HK$14.75 on March 6. 2001: Dell takes the largest share of the worldwide PC market for the first time. Legend
sales reach a peak of HK$27.2 billion in the fiscal year ended March 2000 and decline to HK$23.2 billion in the most recent fiscal year ended March 2004.

2003: The Company changes brand name to Lenovo from Legend to avoid infringement
of overseas brands. The company says it is preparing for expansion outside China, which has overtaken Japan to become the world's second-largest PC market. The US remains the world's largest PC market.

2004: The Company changes its name to Lenovo Group. Time Warner Inc, the world's
largest media company, on January 7 exits a US$50 million Internet venture in China with Lenovo. China accounts for 99 percent of Lenovo's sales in fiscal year ended March 2004 and 98 percent in the previous 12-month period. Lenovo's first-quarter PC shipment growth in China lags rivals such as Dell, according to market researcher IDC Corp. Lenovo has a 10.9 percent share of the Asian market excluding Japan, compared with 7.3 percent for Dell. Lenovo's Asian shipments rise 19 percent, compared with 52 percent for Dell. Lenovo's sales of services and hand-held electronics grow the fastest of all its products in the most recent two fiscal years, each at an average rate that roughly quadruples. Computer sales rise at an average rate of 9 percent in the same period. Lenovo becomes an Olympic worldwide partner. It is the first Chinese company to become a computer technology equipment partner of the IOC. Lenovo decides to develop the rural market by launching the "Yuanmeng" PC series designed for township home users. Lenovo and IBM announce an agreement by which Lenovo will acquire

IBMs Personal Computing Division, its global PC (desktop and notebook computer) business. The acquisition forms a top-tier (third-largest) global PC leader.

2005: Lenovo completes the acquisition of IBM's Personal Computing Division, making
it a new international IT competitor and the third-largest personal computer company in the world. Lenovo announces the closing of a US$350 million strategic investment by three leading private equity firms: Texas Pacific Group, General Atlantic LLC and New bridge Capital LLC. Lenovo establishes a new Innovation Center in Research Triangle Park, N.C., to enable customers, business partners, solution providers and independent software vendors to collaborate on new personal computing solutions. Lenovo introduces the industry's thinnest, lightest and most secure Tablet PC, the ThinkPad X41 Tablet. Lenovo introduces the first widescreen ThinkPad with embedded wireless WAN, the ThinkPad Z60, available for the first time with a titanium cover. Lenovo becomes the world's largest provider of biometric-enabled PCs by selling its one-millionth PC with an integrated fingerprint reader. William J. Amelio is appointed as CEO and President of Lenovo.

2006: Lenovo introduces the first dual-core ThinkPad notebook PCs, improving
productivity and extending battery life for up to 11 hours. Lenovo technology flawlessly supports the 2006 Olympic Winter Games in Torino, Italy, supplying 5,000 desktop PCs, 350 servers and 1,000 notebook computers. Lenovo also hosts seven Internet i.lounges for use by Olympic athletes and visitors. The first Lenovo-branded products outside of China debut worldwide. Researchers, scientists and product design teams from around the world combine Lenovo's heritage in enterprise and consumer PC technology to design the Lenovo 3000 product line, which features new desktop and notebook models specifically designed to provide worry-free computing to the small business market segment.

Organizational Structure
It is the formal and informal framework of policies and rules, within which an organization arranges its lines of authority and communications, and allocates rights and duties. Organizational structure determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. This structure depends entirely on the organizations objective and the strategy chosen to achieve them. In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degree of autonomy. There are various functional departments like-

HR Department Financial Department Marketing Department Transactional Department Relational Department Strategic Department Legal Department

Chart - Organizational Structure

Awards and Certifications:


1)"Client of the Year" in the Advertising Big Bang 08, organized by the Ad Club, Bangalore. 2) MEDIA, the premier marketing trade publication in Asia has awarded Lenovo the Communicator lines between of the Year for this years and Asia-Pacific PR PR Awards. the In particular, Lenovos sophisticated usage of social media and willingness to blur the conventional marketing impressed Media editorial team this year. 3)In Digits cover story Icons of Trust 2008 which brands can you rely on?: Lenovo/IBM beat all other brands to bag the top spot on the Trust Index Lenovo has been voted the most trusted brand in the Laptops category 4) Lenovo India wins three awards in the DQ Channels Channel Choice Awards 2009 a) Best Marketing Support- Silver award b) Best Commercial Terms- Silver award c) Best Online Support Silver award

Vision and Mission

Lenovo strives to be a new world company that makes award-winning PCs for our customers. We operate as a company uninhibited by walls or organizational structures using world sourcing to harness the power of innovation across our global team. We design innovative and exciting products and services to meet our customers needs.

SWOT analysis
STRENGTH Lean cost structure Effective business model Innovation leadership Event sponsoring Good marketing and distribution strategies Strategic alliance with suppliers Quick responsiveness OPPORTUNITY Increasing global demand for PC Specialty shops proving one stop platform for distribution Government Internet boom Increasing product lines Netbooks product portfolios/ organizations increasing their spending on IT

WEAKNESS Unable to maintain sustained growth rate in all market segment Ignoring potential market Retaining of largest shares by competitors Poor global perception High delivery time:3 weeks THREAT Competition threat from both local and international markets Industry reaching maturity Software piracy and clone market Price war Emerging small firms International competitors forming alliances with local competitors.

STRENGTH

1. Lean cost structure: The Groups distinctive capability and expertise in managing costs and expenses allows it to achieve high efficiency and has been one of the most important factors for its success. This has become more critical under the current economic conditions.

2. Effective business model: Lenovos dual business model sets its products, services and business process around customer need and market segmentation. This tightly integrated, end toend model allows the Group to quickly react to market dynamics and changes in the back-end.

3. Innovation leadership: Lenovo owns the greatest track record for innovation in the PC industry and remains committed to innovation in its products and technology. While it needs to be cost-effective, innovation can drive business and add value for customers.

4. Good marketing and distribution strategies: Promotion and distribution at Lenovo is done through a network of channel partners, retail stores, Teleweb, and Lenovo authorized dealers across the globe. Lenovo also promotes environmental friendly green products- ThinkPad X300 series is the first notebook to earn Green Guard certification

5. Strategic alliance with suppliers:

Since Lenovo is horizontally integrated, it depends on the outsourced suppliers for in time delivery of quality products; like many companies, keeping the customer always in mind, time and quality.

6. Quick responsiveness:

The company has Best-in-Class Service. It has 24/7 Technical/Sales Support centers across the globe.

7. Strong R&D: taken over from IBM: Acquiring a reliable/well-known company such as IBM has helped boost its products, especially ThinkPad and IdeaPad.

8. Event sponsoring: Lenovo was the TOP Sponsor of the Olympic Games and provided the technology hardware for these Games in 2008. Nearly every aspect of the management of the Games, from gathering and storing participant data to displaying the scores, was dependent on hardware provided by Lenovo. It gave Lenovo an upper edge as compared to other competitors.

OPPORTUNITY

1. Increasing global demand for PC:

2. Signing of memorandum of understanding: The company can develop their market in US by signing a memorandum of understanding with the US 3. Specialty shops proving one stop platform for distribution 4. Government organizations increasing their spending on IT 5. Internet boom 6. Increasing product portfolios/product Lines 7. Net books
8. Converting manual orders to automotive orders

WEAKNESS

1.

Unable to maintain sustained growth rate in all market segment: Lenovo is heavily weighted showed significant slowdown in the second half of the fiscal year under the economic crisis because it has not adequately addressed the worldwide transaction segment outside China, in particular the consumer market.

2.

Ignoring potential markets: The main focus of Lenovo is on the established markets and they lack marketing strategies to enter into the untapped markets.

3.

Retaining of largest shares by competitors:

Lenovos competitors have larger number of shares in the market. HP (18.1%), Dell (15.6)%, Acer(9.4)% give Lenovo a tough competition.
4.

Poor global perception: In China, the customers perceive Lenovo as a premium brand, but Lenovo has to reinforce this perception to its global brand.

5.

High delivery time:

The order delivery time in Lenovo is around 3 weeks. This results in customers waiting for a longer time.

THREAT
1. Competition threat from both local and international markets: 2. Industry reaching maturity: 3. Software piracy and clone market: 4. Price war 5. Emerging small firms 6. International competitors forming alliances with local competitors.

Lenovo Products

Notebooks

ThinkPad Notebooks

Track record of success, cost-savings Industry-leading capabilities that dramatically increase productivity and reduce cost.

Features: Business class technology Thin, light widescreen designs


Extra long battery life Advanced mobile workstations

Idea Pad Notebooks

Engineered for a great user experience Perfect for home/home office, with distinctive designs and features for entertainment and multimedia.

Features: Home/office versatility 11.1 to 17 inches widescreen displays Dolby home theatre audio Touch sensitive controls VeriFace face recognition securities

Lenovo 3000 Notebooks

Worry-free computing at a great value A smart choice for business computing needs and budgets. Plus, new models ideal for home/home office.

Features: Roomy, widescreen displays Stylish silver colored top covers Preloaded small business softwares LenovoCare tools, support and services

DESKTOPS

Think Centre Desktops

Award winning quality and innovation Industry-leading capabilities that dramatically increase productivity and reduce cost.

Features: Energy efficient desktops Security on a corporate level at a small business price Dual Independence Display (DID) The ThinkCentre Energy Calculator

Idea Centre Desktops

New PCs for home/home office Loaded with features for everything from family finance to multimedia and entertainment. Features: VeriFace face recognition Automatic brightness adjustment Antibacterial keyboard OneKey convenience

Workstations

ThinkCentre Workstations
Features: User centric design Cool and quiet

ISV certifications Environment-friendly

Servers

Tower Servers
Features: Single and dual sockets Easier cooling Existing-network scalability Hard disk drive optimization

Rack Servers

Features: Single and dual sockets Space-optimized design Centralized cable management Centralized server management

Accessories and Upgrades

The Marketing Mix (The 4 P's of Marketing)


Marketing decisions generally fall into the following four controllable categories:

Product Price Place (distribution) Promotion

The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below:
The Marketing Mix

These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response. Product Decisions The term "product" refers to tangible, physical products as well as services. Here are some examples of the decisions that lenovo had made:

Brand name Functionality Styling Quality Safety Packaging Repairs and Support Warranty Accessories and services

Price Decisions Some examples of pricing decisions made by Lenovo include:


Pricing strategy (skim, penetration, etc.) Suggested retail price Volume discounts and wholesale pricing Cash and early payment discounts Seasonal pricing Bundling Price flexibility Price discrimination

Distribution (Place) Decisions Distribution is about getting the products to the customer. Some examples of distribution decisions include:

Distribution channels Market coverage (inclusive, selective, or exclusive distribution) Specific channel members Inventory management Warehousing Distribution centers Order processing Transportation

Promotion Decisions In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Lenovo had made this by:

Promotional strategy (push, pull, etc.) Advertising through internets, T.V, newspapers, etc Personal selling & sales force Sales promotions Public relations & publicity