Lenovo: Strategic Effect of IT

ITSP End Term Project

2/16/2014

Group 1 Deepak Arora Nikhil Gurg Mohit Malik Neerav Sachdeva

Group 1/ITSP End Term Project 2014

Table of Contents
Timeline of Lenovo........................................................................................................................................ 3 Business Strategy .......................................................................................................................................... 3 Value Dimension of Lenovo .......................................................................................................................... 4 IT Strategy aligned to Business Strategy ....................................................................................................... 4 SWOT Analysis for Lenovo ............................................................................................................................ 6 Dynamic Resource Model ............................................................................................................................. 7 Mcfarlans Strategic grid ............................................................................................................................... 7 Porter 5 forces analysis ................................................................................................................................. 8 Balance Score Card for Lenovo ..................................................................................................................... 9 Creating Strategy Map .............................................................................................................................. 9 Creating Scorecard Measures ................................................................................................................. 13 Benefits of Acquisition of ThinkPad ............................................................................................................ 17 Conclusion and Recommendations ............................................................................................................ 17 References .................................................................................................................................................. 17

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Timeline of Lenovo
History of Lenovo:1984 The Lenovo was established in 1984, with an initial capital outlay of only RMB200,000. 1986 Backward integration and forward integration 1990- The very first Legend PC is launched in the market. 1996:-Legend becomes the market share leader in China for the first time. 2002-Lenovo acquired technologies from Microsoft, Acquisitioned the many middle and small size PC companies in China. 2005- It successfully acquisitioned of IBM, making it a new international IT competitor and the thirdlargest personal computer company in the world. 2012-Dropped the IBM tag what next for Lenovo????? What Lenovo Says Personal Computers: Lead in PCs and be respected for our product innovation and quality. Convergence: Lead the industry with an ecosystem of devices, services, applications and content for people to seamlessly connect to people and web content. Culture: Become recognized as one of the best, most trusted and most well-respected companies to work for and do business with.

Business Strategy
Business model built on innovation, operational efficiency and investment in emerging markets. Sustaining a Competitive Advantage:-By increasing market share internationally through innovation and strategic acquisitions. Protect and Attack Strategy Initial Challenges Faced By Lenovo Lenovo has failed to meet a key objective of the merger: leveraging the combined strength of the two companies to grow volume and market share. To generate the demand through more aggressive sales teams. To improve the channel strategy. Increased market spending and better execution outside of China.

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Group 1/ITSP End Term Project 2014 What Transform the Lenovos Business? Disintermediation (cutting out the middleman):- JDA Software's E-commerce Application Enhancing customer value :- Unique distribution strategy Process and operations innovation: ThinkLink Application Let data do the driving :- SAP BI/DW IQ

Value Dimension of Lenovo

Operation Excellence Business Context What: More competitive pricing to customers How: Customer satisfaction and innovation so that they can give competitive pricing. Why: To grow market share and compete with other top 2 players HP and Dell Business Capabilities needed Information and tools for Managers so that they can align the strategy globally. Integrated systems so that they can use the information and deliver the quality and service consistent. Investments for R/D so that they can cut down the costs.

IT Contribution Innovation and 5 R/d Centres Globally

Business Intelligence Tool SAP BI/DW IQ tool Distribution network and effective supply chain tools

IT Strategy aligned to Business Strategy

Innovation Strategy ThinkPad T42 Innovation: - Field agents to receive new case information packets and provide case status updates via the Internet. Scanned files are now uploaded into a searchable database that any authorized user can access from the offices or remotely through a Virtual Private Network connection. It saves huge amount of costs.

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Group 1/ITSP End Term Project 2014 ThinkCentre A50 Innovation:- Employee to access client databases from their own desktop. So no physical access. Rescue and Recovery Innovation :- protect users' data, allowing them to recover deleted or lost files, folders

Operations Excellence ThinkVantage Technologies IT infrastructure:-reduction in overtime, IT service costs and increased business efficiencies. CSAT System:-Information Management and The Customer Satisfaction index numbers to check customer satisfaction. Distribution Network In house manufacturing specialization. JDA Agile Business Process Platform (ABPP) extremely configured order process end-to-end customer service value chain Advanced pricing structures such as volume-based and special customer discounts, promotions and other assorted pricing adjustments. Protect and Attack Strategy Keep the business strategy align globally A Business Simulation Builds Execution Capabilities: - Simulator application to build its leader. BTS Lenovo on a tailored business simulation designed to develop the execution capabilities of high level leaders across global locations Deploying in the cloud: - JDA and SAP BI/DW IQ JDA Cloud Services, Lenovo has achieved faster deployment, rapid time to value, investment protection and an improved cost structure DA Cloud Services to optimize the Web commerce solution based on feedback it receives from its customers

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SWOT Analysis for Lenovo

Strengths Vertical Integration: Helps in keeping cost low and control inventory. Low Cost Production: It manufactures nearly half of its hardware and has set up its production plants in low cost region such as china, Brazil and Argentina to benefit from higher margins. Strong Patents portfolio : With acquisitions of Compaq, IBM etc and firms R&D, it has gathered important patent portfolio related to its PC and Software business Competency in Mergers and Acquisitions Synergy of knowledge and diverse workforce: Instead of traditional headquarter model, it manages 3 centers of excellence US, China and Singapore. Combining different skills and resources results in synergy and premium quality products

Weakness Poor brand perception in developed economies like US and European countries Focus earlier mainly on china, Limited Knowledge of global market Low Differentiation: Lenovo products are little differentiated from competitors products and are in competitive disadvantage if the price offered by competitor is lower. Market share growth is Slow due to competition, fake products/imitations affects sales

Opportunities Growing Indias Smartphone market Growth of Tablet Market: Lenovo is 4th largest tablet seller, it could increase its market share by introducing better quality products. Internet boom - Increase in demand of PCs Government organizations increasing their spending on IT

Threats Profit margin decline on hardware products: Lenovo major source of income is from hardware products, due to rising raw material cost and competition, profit margin will shrink in future. Saturated Smartphone market in developed countries Intense competition Price wars Fake products market

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Dynamic Resource Model

Dynamic Resource Model

IT Infrastructure-App, Innovation ,Supply chain and In house manufacturing specilaization
Resources for advantage

Start

Initial Advantage

Sustainable advantage

Inefficient legacy IBM infrastructure to the JDA platform. JDA Software's Web commerce solution. Distribution network and supply chain applications

Cost +Innovation, BTS simulation App-Global aligned strategy IBM brand name and IBM resources R/D centres Think lInks Apps SAP BI/DW IQ App

Reinvestment in R/D

Mcfarlans Strategic grid

This grid will help in evaluating where does and will IT give added value . Use of IT is of strategic importance for Lenovo as these are critical to future success, use of IT has led to disintermediation of middlemen, reduction in service costs, improving supply chain, vertical integration, and CSAT systems to measure customer satisfaction and provide better customer value. All these benefits of IT had helped Lenovo in providing better customer value.

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Factory

Strategic Lenovo

Support

Turnaround

X axis: Impact on Strategy Y axis: Impact on Business operations

Porter 5 forces analysis

Threat from existing competition Very High Large number of players in the market Dell, HP, Apple, Sony, Samsung etc

Threats from new entrants Low Vertical integration of existing players leading to high switching costs Huge initial investments Difficult to achieve economies of scale to be competitive

Bargaining Power of Suppliers- low Lenovo manufactures its own material to great degree Large number of suppliers in the market

Bargaining power of buyers low to moderate High switching cost - Main customers are enterprises, which purchases in bulk Improving product and service quality, offering extra feature and maintaining strong customer relationship is key to success
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Threats from Substitute products medium Products like ultra-light laptop and ultra-mobile PCs attract young customers and affects B2C sales In case of B2B, enterprise dont see them as useful to organization

Balance Score Card for Lenovo

Balance Score Card has been one of the main features of IT strategy implemented by Lenovo. It has been one of the strategic initiatives of the organization where not only the financial health of the firm but also the intangible assets like supply chain partnership, delivery goodwill can also be mapped and valuated. Secondly it has been of great help in terms of communicating the IT and Business strategy of the firm both internally and externally. Thirdly, it helped the company into streamlining its activity with its strategy and thus leading to acquisition of ThinkPad division from IBM. Finally, it has become one of the strategic advantages for the company as it has been implemented into many other divisions for performance Evaluations. The balance Scorecard for Lenovo is developed as following, 1. Strategy Mapping 2. Creating Scorecard Measures 3. Implementing Scorecard

Creating Strategy Map

It is a generic architecture for describing strategy followed by an organization. The strategy Map for Lenovo is as following,

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STRATEGY MAP

It defines the Mission, Vision, Business Strategy and the effects of four perspectives of balance scorecard are as following to obtain the output for business strategy. The following four images describe how the business strategy can be obtained using the four perspective of the balance score card. The skill development among employees will lead to integration of leading edge manufacturing of various Lenovo products which will lead to reduction in cost and time to delivery and maintenance. This will further help in generating more orders for the company and effectively supply quality products and service through use of IT and learning. Similarly for other images also.

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Once the strategy mapping has been made, it is well defined for making the balance scorecard as strategy mapping is basically a blueprint which defines the pathway from each perspective to finally obtaining business strategy.

Creating Scorecard Measures

The scorecard consist of four perspectives, 1. 2. 3. 4. Financial Customer Internal Process Learning and Growth

For each of the perspective objectives are defined and for each objective there can be various measures to check if that objective has been completed or not. Each measure consists of one to one mapping with a specific target. Each of which can be obtained through various initiatives. The four perspective, their objective, measure, target and initiatives are as following,

A) Financial Perspective
Objective Measure Target Initiative

Broaden Revenue Mix

% of order from various BU

XX% BU1 XX% BU2

1. Generate Awareness of Brand. 2. Provide Innovative Solution to customers. 3. Public success stories in media.

1. ROE Increase shareholder value 2. Cost Reduction in each BU

3. Save managed cost and unused capacity. 4. Save direct material and labor cost through IT

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1. % market Share Technology and Market Leader 2. No of Innovative products and services 3. % of green products

1. Reach X% market share 2. 2-2 major products of each BU 3. X% reduction in next FY 2014

4. Increase the models and types.

B) Customer Perspective

Objective

Measure

Target

Initiative

Develop new technology space

1. No of innovations made. 2. New SCA resources found

1. X% increase in innovations 2. Milestone achieved in SCA resources

1. Collaboration with institutes and Universities. 2. Leveraging Information Expert Systems 3. Increase customer focus of sales organization. 4. Efficient Supply chain system for Retention and Responsiveness

Increase Customer Satisfaction

Customer Satisfaction Survey

Attain X% customer satisfaction

Customer Retention

1. No of collaboration with partners. 2. Sales Discounts

3. X% Discount Budget 4. X% market Vertical penetration.

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Responsiveness to Customer

Delivery in time

X% reduce in complaints

C) Internal Process Perspective

Objective

Measure

Target

Initiative

Timely provide safe and Quality Products

1. Improve manufacturing capacity 2. Supplier Ratings for quality

3. Reduce cycle time by X%. 4. Lowest 10% supplier rejected.

5. Organize R%D teams for future projects. 6. Implement Design Commonality for standardizatio n. 7. Internal Surveys for improving manufacturin g capacity. 8. Effective supply chain management.

Increase productive efficiency at low cost

Training Cost for Manufacturing Floor Crew

X week training per quarter

Standardization of Services

Inventory Cost Reduction

X% reduction by next FY

Increase IT Portfolio

Number of Discovery and Portfolio Investments

X number of projects initiated

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D) Learning and Growth Perspective

Objective

Measure

Target

Initiative

Employee education and skill level

1. No of training hours per annum. 2. Employee skill assessment.

3. At least X% training hours. 4. Cross training of management and technical knowledge

5. Hire Key Technical Employees. 6. Improve Employee skills and work conditions. 7. Celebrate and reward individuals. 8. Tie incentives to idea and qualities. 9. Mentorship programs.

Employee satisfaction scores

Employee Satisfaction Surveys

Achieve more than X% in FY

Knowledge management systems

No of idea created and published in system

At least X number per annum

Diversified Workforce

Number of cultural activities occurred

Achieve X activity per month.

Thus above was the entire balance score card for Lenovo.

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Benefits of Acquisition of ThinkPad

Learning new methodologies and better business processes Getting access to new markets Increase in market share Making use of past data for making better informed decisions

Conclusion and Recommendations

Use data mining to reduce the process turnaround time for higher efficiency. Timely review of IT applications to monitor their use and effectiveness in the current scenario and make necessary changes as per requirement. Integrate business process and IT applications in vertical acquisition or vertical supply chain.

References
http://www.lenovo.com/in/en/ http://en.wikipedia.org/wiki/Lenovo http://en.wikipedia.org/wiki/ThinkPad http://news.lenovo.com/article_display.cfm?article_id=1755 http://www.bbc.co.uk/news/business-25956864 http://www.computerworld.com/s/article/9245907/Lenovo_s_Motorola_IBM_server_buys_will_likely_ get_strict_U.S._security_review http://www.fool.com/investing/general/2014/01/27/why-lenovo-is-buying-ibms-server-business.aspx
http://www.china.org.cn/english/NM-e/115844.htm

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