SWOT analysis of Lenovo

| February 16, 2013

This is Lenovo Group Limited SWOT analysis in 2013. For more information on how to do a SWOT analysis please refer to our article.

Company Background

Key Facts
Name Lenovo Group Limited
Logo
Industries served Computer hardware and Electronics
Geographic areas served Worldwide
Headquarters China and U.S.
Current CEO Yang Yuanqing
Revenue $ 29.57 billion (2012)
Profit $ 472 million (2012)
Employees 27,000 (2012)
Main Competitors Apple Inc., Samsung Electronics Co., Microsoft Corporation, Dell Inc., Hewlett-Packard Company, Sony Corporation, Fujitsu Limited and many others.

Lenovo is a $30 billion electronics company and the world’s second-largest PC vendor. It employs 30,000 people, operates in more than 60 countries and serves customers in more than 160 countries. Lenovo has been the fastest growing major PC company for more than 3 years.
You can find more information about the business in its official website or Wikipedia’s article.

SWOT

Lenovo SWOT analysis 2013
Strengths Weaknesses
  1. Vertical integration
  2. Knowledge of China’s market
  3. Low cost production
  4. Strong patents portfolio
  5. Competency in mergers and acquisitions
  6. Synergy of knowledge and diverse workforce
Weaknesses
  1. Poor brand perception in the developed economies
  2. Low differentiation
  3. Commodity (computer hardware) products
Opportunities Threats
  1. Growing India’s smartphone market
  2. Growth of tablets market
  3. Obtaining patents through acquisitions
  4. Tablet market growth
Threats
  1. Profit margin decline on hardware products
  2. Slowing growth rate of the laptops market
  3. Saturated smartphone markets in developed countries
  4. Rapid technological change
  5. Intense competition

Strengths

  1. Vertical integration. Lenovo’s strategy to vertically integrate has paid off. The business can keep costs low, keep up with the pace, control inventory and rely less on original equipment manufacturers (OEM).
  2. Knowledge of China’s market. Lenovo has emerged in China and continues to be one of the largest players in homeland market. The firm’s knowledge of China’s market and the ability to suit Chinese tastes resulted for the wide acceptance and support for the business' products.
  3. Low cost production. Lenovo manufactures nearly half of its hardware and has set up production plants in low cost regions such as China, Brazil and Argentina to benefit from higher margins. It is also able to manufacture low cost products that are price competitive.
  4. Competency in mergers and acquisitions. Lenovo has been continuously acquiring firms to bring patents, new capabilities, assets and skills to the company. Most importantly, through successful acquisitions and joint ventures, Lenovo accessed new markets and distribution networks. Compaq is the most notable and successful Lenovo’s acquisition to date.
  5. Strong patents portfolio. With an acquisition of Compaq and Stoneware and a help of firm’s R&D, Lenovo has gathered an important patents portfolio related to its PC and software businesses.
  6. Synergy of knowledge and diverse workforce. Instead of traditional headquarter model, Lenovo manages 3 centers of excellence around the world (US, China and Singapore). Combining different skills and resources results in synergy and premium quality products.

Weaknesses

  1. Poor brand perception in the developed economies. Lenovo’s primary market is Asia, where it sells most of its production. The company finds it hard to access US and Europe markets as its brand perception is low there.
  2. Low differentiation. Apart from the low price, Lenovo products are little differentiated from competitors’ products and are in competitive disadvantage if the price offered by competitor is lower.
  3. Commodity products. The large stream of Lenovo’s revenues comes from computer, especially laptop, sales, which is a commoditized product. Computer hardware (commodity) products are sold with a very low profit margin.

Opportunities

  1. Growing India’s smartphone market. India’s smartphone market is one of the least penetrated among Asia/Pacific countries. Lenovo could easily penetrate India’s market with its already successful low price LePhone.
  2. Growth of tablets market. Lenovo currently ranks as 4th biggest tablets seller. The business could increase its market share by introducing better quality products.
  3. Obtaining patents through acquisitions. If Lenovo wants to sustain its growth, it needs to obtain more patents and the best way to do that is to acquire the firms holding them, as it did with IBM’s Compaq.
  4. Tablet market growth. Tablet market is expected to grow in double digits for the next few years and the company has a great opportunity to release new tablet models and benefit from the market growth.

Threats

  1. Profit margin decline on hardware products. Lenovo’s main income is from selling hardware products, which prices will increase in the future due to rising raw material prices. This will add to costs for Lenovo and will further cut the profit margin.
  2. Slowing growth rate of the laptops market. Growth rate of the computer market is slowing down and in the near future the markets will become saturated. It will prove hard for Lenovo to compete in such market and continue to grow its market share.
  3. Saturated smartphone markets in developed countries. Although Lenovo does not compete in the developed economies with its smartphones it will have difficulties in growing its smartphone division and entering developed economies later as the smartphones market there is already saturated.
  4. Rapid technological change. The serious threat that Lenovo and the other tech companies are facing is a rapid technological change. Companies are under the pressure to release the new products faster and faster. The one that cannot keep up with the competition soon fails.
  5. Intense competition. The company faces intense competition in all its business segments. It competes in terms of price, quality, brand, technology, reputation, distribution and range of products, with Acer, Apple, Dell, HP and Toshiba.