The proper planning and execution of strategy is crucial for any company to develop, especially when the industry is extremely competitive or volatile. Industry evolution brings change in sources and nature of competition (Porter 1979). This essay will analyse the external competitive environment and critically evaluate the strategies employed by Lenovo, a Chinese technological corporation, in dealing with the overall declining trend of the PC (personal computer) market.
Case study overview
Recent years saw the worldwide PC market growth rate undergoing a drastic plummet (Arthur 2013). The latest statistics from market research firm Gartner, showed an 8.6 percent decline in PC sales in the third quarter of 2013, with shipments dipping for sixth consecutive quarters (Hachman 2013). This trend underscored challenges confronting PC manufacturers as customers favour mobile devices such as tablet computers and smartphones.
After suffering a US$226 million loss in 2008, Lenovo attempted to improve its profitability through innovation and efficiency by initiating the Protect and Attack strategy in 2009, which aimed to guard its core PC business and strived to compete in emerging markets with high levels of growth (Lenovo 2010). In response to the recent decline in PC sales, Lenovo placed emphasis in executing the Protect and Attack strategy by evolving and innovating its product portfolio, conducting strategic acquisitions and implementing novel marketing schemes.
External environment and strategy
According to Porter (1979), five competitive forces are crucial in examining an industry’s profitability and formulating strategy. Among the five, the threat of substitutes and competitive rivalry are two most dominant forces that shaped Lenovo’s long-term evolutionary strategy in tackling competition and changing reality in the industry.
As the principal analyst at Gartner claimed, consumers have steadily shifted from PC’s to reasonably priced tablets, and tend to be in favour of smartphones with large screens (Rigby 2013). The threat of substitute products is indeed high, with the International Data Corporation (IDC) expecting tablet sales to exceed total PC sales by the fourth quarter of 2013 (IDC 2013). Although Lenovo continued to produce iterations of convertible tablet PC’s acquired from IBM’s ThinkPad brand, Lenovo anticipated the potential growth of tablets and decline in PC sales, and consequently introduced the premium ThinkPad tablet, and consumer orientated IdeaPad tablet in 2011 and 2012 respectively (Lenovo 2013). In addition, Lenovo entered the smartphone market in 2012; offering a wide range of large screen premium, and medium sized lower-end models, in attempt to capitalise on the profitability of the smartphone industry.
There is also a high degree of competitive rivalry, due to the sheer number and size of competitors in the PC industry. According to Gartner (2011), over 40% of PC shipments consisted of products from...