Lenovo Group Ltd. has been capturing market share in the personal computer space, making inroads into the turf dominated by established players such as Apple, Inc. (AAPL), Hewlett-Packard Co. (HPQ) and Dell. Established as Legend Holdings in 1984, the Chinese company shot into prominence after acquiring the personal computing division of International Business Machines Corp. (IBM) in 2005. Since then, the company, a relatively late entrant to the laptop market, has strategized to hold its own against its prominent competitors. Even though Lenovo has not been a major disruptive force in the PC sector, it has certainly brought about some change.
According to the information technology research firm IDC, almost one in five PCs shipped worldwide in 2014 was a Lenovo, and the company’s market share was up from 17 percent for 2013. In comparison, Apple’s market share for 2014 was 6.4 percent, up from 5.4 percent for 2013. Similarly, HP and Dell lag Lenovo in market share.
Protect and Attack
It seems Lenovo has been successful by adopting a strategy of “protect and attack,” whereby the company protects its position in the laptop market, while simultaneously trying to expand its share of the mobile devices market. Thus, while others such as Apple were focusing more on the mobile sector (seeing it as a “post-PC” world after devices such as the iPad came to the market), Lenovo saw it more as a “PC-plus” world. Thus, not only did Lenovo try to develop a presence in the mobile market, it continued to focus on the PC market and innovate in order to gain market share. This has led Lenovo to introduce products such as its “Yoga Ultrabook” line of hybrid PCs with hybrid functions like a tablet.
Supply Chain Makeover
Lenovo’s supply chain strategy has also given the company an advantage. Initially, its supply chain was not well managed, since Lenovo and IBM followed different strategies. However, Lenovo revamped its strategy to manufacture some materials in a vertically integrated approach, while outsourcing others. It also cut down on shipping costs by manufacturing near the markets where it sells products. The company hoped to sell enough products that it could achieve economies of scale and compete on a price basis.
At a time when others such as Apple manufacture primarily offshore and are heavily dependent on suppliers, Lenovo has actually being bringing some manufacturing back to the United States. While labor costs are higher in the U.S., the company has found that it can employ a smaller team. And after factoring in the shipping cost advantage, it seems on-shoring is working for Lenovo. The company also takes advantage of its global presence to incorporate best practices from across the world into its operations.
Not a Leader in the U.S.
Even though Lenovo has made inroads into the global PC market, it is still playing catch up to Apple and other major players in the U.S. In 2014, for instance, Lenovo’s market share for U.S. PC shipments was a little more than 10 percent, compared to Apple’s 12 percent, Dell’s 24 percent and HP’s 27 percent.
In the United States, Lenovo’s products tend to have an appeal for the more functional corporate and education markets, thanks to its IBM legacy. Nonetheless, the market doesn’t perceive Lenovo to be as high-end or stylish a brand as Apple, which has been lauded for its fundamental innovations, such as the iPad. To combat this, Lenovo has positioned some of its higher-end products under a “Think” business group to differentiate them from the “Lenovo” brand. These higher-end Think PC products are more geared to businesses.
The Bottom Line
Lenovo has emerged as a formidable competitor in the laptop space. While it has gained market share based on its price advantage, it has not been a maverick that has truly disrupted the industry. However, there is still scope for growth. As more people around the world buy mobile phones and tablets, Lenovo can certainly compete on price and gain market share. And this young company could still surprise the world in future.