Review The Lenovo Group Limited Commerce Essay

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Lenovo Group Limited founded in 1984 is ranked as China's largest and the world's 4th biggest personal computer manufacturer, after Hp and Dell of the U.S. and Acer of Taiwan. Lenovo has a product line that includes everything from servers and storage devices to printers, printer supplies, projectors, digital products, computing accessories, computing services and mobile handsets, all in addition to its primary PC.

Its advantage over other manufacturer is that Lenovo has become a name for quality produced computers that cater to the needs of the consumers . It has been successful in capturing the market with its latest innovations and recently .Further with its purchase of the PC division of IBM became the start for Lenovo to venture into more high potential overseas market.With affiliation with IBM , Lenovo acquired the right and privilege to use the IBM brand name for five years , such as the 'ThinkPad'. The company transferred its corporate headquarters from Beijing, China to North Carolina, USA. Today the group conducts business in 166 countries and employs over 25,000 people worldwide.Sales outside of Greater China compromised 59 percent of the company's total turnover in the second quarter of 2007.

Lenovo 's success was result of very wise management decisions and strategies . Lenovo is no longer just an importer of computers but it turned itself into a producer and seller , opening more areas of opportunity for expansion . Lenovo continued the development of innovative products and entered into the ``Pentium era ' and has become unstoppable in creating a name that captures a significant market share . In 2000what made Lenovo a very much loved company by the consumers is their ability to identify the consumer needs , to immediately provide to satisfy such demands . Despite possible disadvantages to their company image , Lenovo , made known to the public that they are recalling laptops and replacing them due to a report that a failure in battery performance has led to an inconvenience to the users .

Challenges

After 2004, multinational PC makers like Dell and HP began to have a major impact on Lenovo market share in 2004, particularly among key accounts-mandating better execution and core competitiveness in order to increase market share and improve business performance.

 Solutions

To address such challenges, Lenovo proposed changes to its business model and strategy in 2004, employing a project-focused approach to develop its corporate strategy. Specific steps taken were:

 

Expanding into new markets, solving underlying problems, enhancing organizational efficiency or improving employee satisfaction or capabilities.

 

2. The company believes that certain conditions must exist in order to successfully utilize project management: 1st, a company must face a challenge (i.e. an external factor that demands it to do so); 2nd the office must be led by a professional team in order to guarantee that company-specific systems are developed; and finally, it must

adjust with the company's organizational culture and be appreciated. Otherwise it's difficult to execute.

 

3. Previously,stretegic plans were not financially supported but now Lenovo earmarked money for strategic implementation of plans.

Valuing project management professionals

 

1. Lenovo sent its top talent in project management to take the PMP certification exam developed and managed by Projecrt management Institute (PMI) which is the largest professional project management institute in the world. Starting from its functional departments (e.g. R&D, supply chain management, etc.) Lenovo selected a group of key professionals to receive training in management and sit for the PMP certification. The returning professionals catalyzed project management in their respective functional departments and trained other team members.

 

2. A hierarchy of project management positions was introduced within the company. Management Professionals were appraised by experts annually on two fronts: 1st, based on their knowledge base, namely their background and relevant understanding;

2nd, based on their performance. As an example, the company's sales division is broken up into sequential levels such as assistant salesperson, sales manager and consultant. The hierarchy builds a professional ladder for project managers, serving as a channel for project management career development.

 

Major Achievements

Lenovo's experimentation in project management significantly

- advanced the transformation in its corporate strategy

- improved its business model

- improved team work and

- leveled the playing field

- team culture and corporate culture have been promoted

- an innovative spirit has been instilled and international integration has been improved.

In terms of the market results, Lenovo's adaptation of project management has improved the

company's core competitiveness with improved delivery and customer satisfaction.

In turn, distinctive performance was delivered: In 2006, the company had a market share of 7% in the global PC market, led only by Dell and HP. Its total turnover was USD 14.6 billion, a rise of 10 percent over the previous year.

 

The key theme of Lenovo for 2010 is metrics, metrics and more metrics. As organisations switch their focus from surviving to demonstrating business value, metrics will play an increasingly important role in keeping management informed about project performance and its impact on the bottom line and customer service.

1. The Implementation of New PPM Solutions Will Soar

Programme and project managers, under pressure from senior management to demonstrate project portfolio performance and its impact on the enterprise, will make the pitch for - and win - resources to implement project portfolio management solutions. This will provide the fact-based decision-making for

senior management.

2. Senior Executives Will Embrace the Value of Project and Programme Governance

To facilitate improved organisational performance, project and programme governance will be embraced from executive management to the project managers. This will help performance by ensuring the portfolio,

3. Vendor Management and Programme Outsourcing Will Move Front and Centre

The trend of outsourcing will leap forward in 2010 as organisations continue to look to do more without permanent increases in staffing and other resources.

4. Risk Management Will Become a PM Obsession

The greater emphasis on financial risk management will trickle through to other parts of the enterprise where risk assessment principles can be used to drive performance. This will lead to an increased focus on PM risk assessment with an emphasis at the programme as well as the portfolio level.

 

Working Model

Lenovo owes its success to having user-friendly products and services, being less over-engineered and less expensive than those provided by global market leaders with features that address peculiar needs of China's markets. Its business model combines:familiarity with specific market characteristics and user requirements;

a superior domestic distribution network and information management

advanced industrial designs;

strong brand recognition;

reliance on a low cost structure; and

access to well-educated and trainable knowledge workers.

 

Developing Innovative Capabilities

Another strength is in industrial design and materials. Legend's success in the China market owed much to its decision in 1998 to introduce a laptop (the Tianxi model) for consumers and small businesses, melding a stylish design with performance features that suited this market. It was introduced after 2 years of work that involved some of the leading global players in materials, such as GE Plastics and Nike, and well-known design firms such as Palo Alto-based IDEO and Portland-based Ziba Design.

 

Weak to go global

Around 2004, the company realized that it had to expand beyond its China base if it wanted to avoid a slow-down. This exposed two fundamental weaknesses:

A heavy reliance on China's price-sensitive and low-margin market scope could squeeze the company's profits.

This limited funds available for developing new products and services and developing global brand recognition.

With revenues of HK$ 22 billion (roughly US$ 2.9 billion) in 2005,the company was much smaller than global industry leaders.

 

Acquiring IBM's PC division

Implementation challenges

The challenges of implementing this acquisition are huge: to compete in a business with slim margins and fierce competition while patching together complicated supply chains, sales networks and information systems. The new Lenovo needs to retain IBM Think Pad customers, while developing its own brand.

An equally important challenge is keeping cost leadership. The new company has four times the revenue of the old Lenovo, but six times the staff cost of the China group alone and only twice the profit.

              A clash seemed unavoidable. The first CEO of the new Lenovo, an IBM veteran,  left after only a few months The new one, William J. Amelio was hired by TPG. He had worked in IBM's PC division from 1979 to 1995 but arguably his greatest attraction for Lenovo was his position with Dell since 2001 where, as Senior Vice President for Asia-Pacific and Japan, he had shaped Dell's aggressive market penetration strategies.

 

Opportunities

              However, this diversity of management cultures could also become a source of learning.  For instance, only 18% of Lenovo"s pre-acquisition revenues came from laptops, while that share for IBM's PC division was 60%. For IBM, corporate customers represented almost 60% of revenues while 83% of Lenovos revenues came from small businesses and consumers. Most importantly, Lenovo expected to benefit from IBM's global presence to overcome its lack of experience in overseas markets.

Lenovo expects to gain access to a worldwide network of skilled computer sales and distribution employees who know tax laws and invoicing practices in 66 countries. The same is true for R&D. After the acquisition,

             

  Immediate benefits include technical support from IBM R&D labs, access to global market intelligence and distribution know-how, and learning for further development of Think Pad laptops.  The acquisition of 1,500 IBM patents might also generate additional income for Lenovo It is an open question, however, to what degree this will enable Lenovo to strengthen and upgrade its own innovative capabilities.

 

Conclusions

An important finding here is that successful companies have not attempted to jump into "technology leadership" roles, trying to compete head-on with global technology leaders through "radical" innovations. Instead, they have focused on "incremental" and "architectural" innovations that allow them to pursue "technology diversification" strategies.

Such policies can only succeed if they fulfill two conditions: they need to balance protection of intellectual property rights with incentives for knowledge diffusion to local firms; and they need to provide a sufficiently large pool of people with the skills needed to benefit from integration into global knowledge networks.

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