Lenovo: Strategic Analysis

Strategy and sustainability: the expression of organizational values and vision

Lenovo Group Ltd is a global technology company with headquarters in Beijing . It was founded in 1984. In 1996, it has become China’s largest PC Company. Its name used to be Legend Holding, but in 2004 the company was renamed to Lenovo. In order to drive Lenovo’s global and local business approach, it developed operational centers in strategically relevant places like Morrisville (the United States) and Singapore. Most Lenovo’s research centers are located in China; however, two research centers are located in Mexico and India. In 2014, Lenovo was rated as the world’s third maker of smartphones and third global provider of x86-based server hardware, software, and services. Lenovo is the world’s largest PC vendor and was ranked #286 on the Fortune 500 list. Its 55 thousand employees work in its operational centers, research centers, manufacturing centers, and sales centers, serving customers in over 160 countries.

Lenovo’s strategic intent

According to the Hamel and Prahalad’s concept, strategic intent is more appropriate for company’s leaders in a dynamic global environment. Researchers describe strategic intent as long term aims, which are not detached plans, but relate to the company’s mission. Lenovo’s organization-wide goals are more defined in terms of customer satisfaction then in terms of market growth or financial outcomes. For instance, in its leadership transformation initiatives that took place in FY 2015/16, Lenovo’s leaders were focused on customer-centricity and entrepreneurship. Thus, its long-term strategic intent is to become an innovation leader and a globally respected company by focusing on the areas of innovation and customer engagement.

The fundamental purpose of the Lenovo, apart from ‘making money’, is developing special technical and cloud solutions for its customers in order to react to the changing world (Lenovo Group Limited 2016d). At the beginning of its history, Lenovo has been a company producing devices, since its core business areas were PCs and smartphones. However, the era of the “Internet of Things” is expanding. The devices have become more manageable and controllable, since almost all of them are built with computing, storage, and networking modules. Thus, people require new solutions, based on the mix of innovative devices and cloud computing. In this case, Lenovo aims to solve the existing problems by developing a balanced “Device + Cloud” model. Company’s leaders believe that this will allow the company to develop amazing new services, content, and solutions, which will meet the customers’ needs.

Lenovo is a huge company with a great number of stakeholders. For the fiscal year that ended on March 31, 2016, its group revenue was $44,912 million (Lenovo Group Limited 2016d). Such financial results were based on the wide geography of the company’s markets – Americas, China, Asia Pacific, and Europe-Middle East-Africa regions. The company sells computers, mobile phones and provides services to the citizens all over the world. Moreover, it creates employment for more than 55 thousands of people in 160 countries (Lenovo Group Limited 2016d). Such scale proves that if the company were to go bankrupt next year, it would harm a huge number of customers, employees, shareholders and business partners.

During more than 25 years of its history, Lenovo has been dedicated to providing high quality computer products and services. However, in response to the existent market trends and customers’ needs the company has changed its vision by adding new points. For example, in 2016 Lenovo positions itself as an innovative company that produces not only PCs and mobile devices, but also develops cloud-based technologies (Lenovo Group Limited 2016d).

Lenovo has developed its own Employee Code of Conduct, where it (Lenovo Group Limited n.d.) provided guidance to the company’s staff on a wide range of ethical issues, i.e. trading in securities and complying with governmental relations, respecting and protecting intellectual property, reporting unlawful or inappropriate conduct. Additionally, Lenovo describes its own commitment to the employees by stating that they are the greatest company’s asset. Therefore, the company commits to providing a safe and healthy working environment, offers competitive compensation packages, etc. Most of the researches recognize Lenovo as a leading employer around the world (Lenovo Group Limited 2016a).

The analysis of the company’s leaders’ names during the last 10 years proves that most of them have been with the company for more than 10 years. For example, Yang Yuanqing has been a Lenovo’s Chief Executive Officer since 1997. Wong Wai Ming has become a Lenovo’s Executive Vice President and Chief Financial Officer in 2007. Before this appointment he had been an independent non-executive director of the Company since 1999. Gianfranco Lanci has become a Corporate President and Chief Operating Office in 2012 after years of managing the company’s business areas (Lenovo Group Limited, 2016c).

The analysis of the company’s annual reports and CEO’s statements proves that its leaders are dedicated both to short-term performance and long-term growth. In order to meet the market and industry challenges, a series of business realignment and restructuring actions was taken in 2015. According to it, the new company’s structure addresses the following groups of businesses portfolio: the PC and Smart Device Business Group, Data Center Group, Mobile Business Group, and Lenovo Capital and Incubator Group. It allowed the company to develop a more efficient cost structure amidst market challenges. Despite the huge restructuring, Lenovo’s strategic focus remains consistent, since the company’s leaders state that the PC business will always be a core concern. Thus, Lenovo’s leadership is stable and forward looking.

It is evident, that every company requires stable finance performance. However, Lenovo does not consider financial success as its first priority. The company strives to transform itself from a product centric to a customer centric company. In order to achieve its long-term intentions, Lenovo should use the Hamel and Prahalad’s model. According to this model, Lenovo’s leaders should link together four strategic components: foresight, strategic architecture, strategic intent, and core competencies. Mburu and Thuo prove that in order to develop a more stable and successful company, it is necessary to change its status quo and improve present products or markets. Thus, first of all, Lenovo’s leaders need to have a good foresight that will help them to predict future trends and long-term results of short-term actions. Second, they need to design a strategic architecture, create strategic intent and rebuild core competencies.

Evaluating strategic approaches to innovation on performance frontier

Before analyzing Lenovo’s approach to innovations, it is necessary to look at the concept of “Blue Ocean” developed by Kim and Mauborgne. According to their concept, businesses are able to operate in a league of their own without intense competition. The metaphor of the “blue ocean” represents such industries, which offer greater opportunities or higher profit potential than traditional industries. Thus, the company can search and join uncontested markets instead of competing on the existed ones. In response to the decrease on the PC market caused by the customers’ orientation to buy more smartphones and tablets, Lenovo has developed its “blue ocean” strategy called “PC+”. According to this strategy, Lenovo has started to build a more balanced product portfolio to drive growth. This product portfolio is based on the following products: terminal products like PCs, smartphones, tablet PCs, and smart TVs.  Thus, the company strives to move from the red ocean of PC into the blue ocean of smartphones and tablets. Similarly to the companies like Apple, HTC, and Samsung, Lenovo decided to follow the trend and produce more smartphones and tablets. However, unlike the competitors who produce premium smartphones, Lenovo is orientated to the lower price segments (Gao). Therefore, it allow the company to meet the customers’ needs and increase the profitability at the same time, since smartphones and tablets have higher profit margins compared to PCs.

In order to analyze how well Lenovo has done in the past five years in terms of ESG sustainability innovations and organizational improvements, the Eccles and Serafeim’s approach can be used. Lenovo’s leaders identified the following ESG (environmental, social, governance) factors that are the most critical for their business. First of all, the company is focused on the employee welfare. According to its “Responsibility for Employee Health and Safety” corporate policy, the company creates and maintains a safe workplace for all employees (Lenovo Group Limited n.d.). Moreover, the company prioritises health and safety at every location in which it is doing business (Lenovo Group Limited n.d.). Furthermore, the company also offers competitive compensation packages. The company was also recognized by Bureau Veritas as a company that continually drives processes and program improvements on the workplaces (Lenovo Group Limited 2016a). As a result, the company obtained OHSAS 18001 certification in 2007 at all global manufacturing locations.

Second, Lenovo also acts as a global philanthropic organization by committing 1% of its pretax income to global social investment programs and initiatives (Lenovo Group Limited 2016a). For example, Lenovo has created the Next Generation Hope Fund.  This fund supports a wide range of programs dedicated to education, entrepreneurship, research, disaster relief, and regional community outreach. Lenovo supports global education investments in both K-12 and higher education by donating equipment, providing cash contributions, and lending the expertise of its employees to schools and related organizations across all global markets. In 2009, Lenovo also established the Lenovo’s Youth Public Entrepreneurship program in China (Lenovo Group Limited 2016a). This program assists college students in China to build their careers in public welfare. Thus, the company helps China’s public welfare enterprises to become more vibrant and dynamic. In the program framework, Lenovo offers its professional resources to assist in training, public practice, venture capital, and other skills (Lenovo Group Limited 2016a).

Third, Lenovo and its employees have supported various global disaster relief efforts including relief efforts in Haiti, Chile, and Taiwan. They have also established extensive relationships with local communities and regional non-governmental organizations. Lenovo’s regional offices support education, environmental and social causes unique to these communities. Lenovo is also highly dedicated to providing the environmental protection activities in all of its business activities from operations to product design and recycling solutions. The company has developed the Environmental affairs policy (Lenovo Group Limited 2006), which is supported by the company’s ISO 14001 certified global environmental management system (EMS).

According to the company’s Sustainability Report (Lenovo Group Limited 2015), the company quantified the financial impact of its ESG actions. That means that the company reports its cash donations and philanthropy results. For instance, in FY 2014/2015, the company has donated $590,000 (Lenovo Group Limited 2015). Furthermore, the company has also calculated the employee giving (through efforts sponsored by Lenovo) results, which were valued at $575,941 in FY 2014/2015 (Lenovo Group Limited 2015). Additionally, Lenovo has developed multiple indicators that characterize the program performance, such as Metric Tons CO2, percentage of total energy from renewable sources, waste intensity, percentage of regional coverage for take-back programs, percentage of products with PCF established, etc. (Lenovo Group Limited 2015).

Lenovo promotes various labor practices that help to take care of its employees. For example, it complies with International Labor Organization Child Labor Conventions and laws related to child labor in every jurisdiction in which it operates (Lenovo Group Limited 2016b). The company offers competitive total rewards, which includes base pay, performance bonus, and other cash allowances, i.e. overtime (Lenovo Group Limited 2015). Each direct laborer is endowed with social insurance and has an opportunity to attend study courses in the Lenovo University.

In order to provide environmental protection, Lenovo has adopted a comprehensive Environmentally Conscious Products Program. According to this program, Lenovo started to introduce green designs to the majority of its products. The company uses the Recycled Plastics for manufacturing its products. For example, Each ThinkPad L Series notebook diverts the equivalent of 10 plastic water bottles from going to landfills (Lenovo Group Limited 2015). All Lenovo ThinkPads are low halogen with the exception of the power cord and adapter. Another Lenovo core focus is product energy efficiency. For example, the company has achieved generation-to-generation improvement in the energy efficiency and the resulting smaller carbon footprint of ThinkPad products (Lenovo Group Limited 2015). Furthermore, due to the Lenovo Longevity Battery Technology it became possible to extend laptop battery cycle life.

Lenovo experts realize the importance of communicating with the stakeholders about the developed innovations. Thus, they regularly engage with a variety of stakeholders and consider their feedback by organizing interactions with customers, suppliers, regulators, employees, investors, the communities in which the company operates, nongovernmental organizations (NGOs), and industry peers. Due to the provided ESG policy Lenovo was able to progress in implementing its strategic intent, as was described by Hamel and Prahalad. Researchers emphasize that the company needs to develop the core competencies that will provide it with access to a wide variety of markets and make a significant contribution to the perceived customer benefits of its products. As a result of innovative policies that Lenovo provides, the company achieved a record market share of 21% in 2015 and continues its successful ways of producing PCs (Lenovo Group Limited 2016d). Moreover, by the share of sold tablets the company has strengthened its #3 position in the world. Thereby, it has developed core competencies that has resulted in short-term benefits for its customers and will lead to the future success of the company.

Strategic position statement analysis

The analysis of the Lenovo strategy and its results proves that all strategy elements align to support each other. This has become possible through integrating two major acquisitions Motorola Mobility and System X, which support the core Lenovo business – PC production. Despite the challenging global economy, which is characterized by significant currency volatility in key emerging markets, decline in the PC and tablet markets, and slower than expected growth in the smartphone market, the company has achieved significant results. For example, it continued to develop its smartphone business in key emerging markets, particularly in India, Indonesia, Russia, and across the Middle East (Lenovo Group Limited 2016d). Moreover, the company has won 66 awards at the Consumer Electronics Show, the world’s largest and most prestigious technology event, and 23 awards at the 2016 Mobile World Congress, the top mobile technology show (Lenovo Group Limited 2016d). Such successful results can be attributed to the largest restructuring in the company’s history, when it was divided into four business groups: PC and Smart device Business Group, Data Center Group, Mobile Business Group, and Lenovo Capital and Incubator Group. Therefore, the model “innovative devices + cloud connectivity” has shown its effectiveness.

The chosen Lenovo strategy preserves its advantages, as for a long time the company has positioned itself as the global innovation leader. The main Lenovo advantage is its innovative approach and strong R&D sources. Due to the focus on innovations the company is able to quickly respond to market trends. For instance, all company’s employees are encouraged to share their ideas (Gao). Brainstorming sessions and regular monitoring of the latest science and technology news provide its research department with an opportunity to develop new innovative proposals. Additionally, company’s senior managers also take part in analyzing technology trends. During the process of developing the company’s innovative strategy, they constantly communicate with the employees. Lenovo’s innovative approach to design and production provides the company with an opportunity to deliver high-quality and durable devices. Thus, it is able to meet consumer demand and realize its strategic intent.

The existent Lenovo’s strategy may lead to incremental change within the industry, since the company continues the trend of combining device production and cloud computing. Such scope of the Lenovo strategy is appropriate, since the company is able to combine its traditional unique capabilities in producing end-user devices and new developed capabilities in cloud computing. Thus, the company will be able to produce devices, which will provide absolutely new content, services and solutions due to their seamless connectivity.

Unlike its main competitors, Apple, HP, and DELL, Lenovo focuses on the customer. The company is oriented at the lower cost devices, which will attract more customers and allow the company to achieve strong profitability. The company has also identified the trade-offs and limitations of its strategic action plan. First of all, in case of significant changes in market trends and customers tastes the company will need to look for absolutely new ways and methods of meeting the customers’ demands. Furthermore, any macro-economic and socio-political problems in local markets or changes in the regulatory environments, i.e. the currency volatility and tax rules, can also negatively influence the strategy action plan implementation.

Analyzing and evaluating the implications of the general ecosystem and competitive environment

The Porter’s Five Forces concept was used in order to analyze the current state of Lenovo.

Buyer’s bargaining power

The buyers’ bargaining power for Lenovo is relatively low in the PC, tablets and smartphone markets since there is a large number of customers. In the case of some customers refusing to buy products, the company will still be able to find others. However, the company should pay attention to maintaining strong customer relationships and improving products and service quality, which will help control the buyer’s bargaining power.

Supplier’s Bargaining Power

Supplier’s bargaining power is weak, since they are reliant on high volumes. If Lenovo cuts volumes, it will negatively affect the suppliers’ profits. Since volume is a critical factor for suppliers, it is difficult for them to overcome it. Moreover, the Lenovo’s diverse distribution channels give less bargaining power single distributors.

Threat of substitutes

There is a high risk of substitutes, presented by the ultralight laptops and ultramobile PCs. Moreover, image devices produced by Apple may also threaten Lenovo, even despite their high price. However, the company concentrates on developing the medium priced devices, which creates a so-called “blue ocean” for them – a new market with low competition.

Threat of new entry

The entry barrier in the PC and smartphones market is relatively high. The new company needs to invest a lot of money in order to reach the necessary sailing scale. New competitors will have a higher cost of producing additional items, compared with the existent large companies, such as Lenovo. Moreover, in order to become a visible competitor, a company needs to have a strong brand name. However, young companies don’t have an opportunity to provide a strong goodwill. Further, the need to use advanced technologies also increases the entry barriers, since the new company needs to develop its own advanced technologies or buy someone’s for the high price before effectively competing.

Rivalry

There are three companies among Lenovo main competitors – Apple, Dell, and HP, which according with the TrendForce research own 45% of the PCs market in 2016, while the Lenovo market share of the PC market is 20% (Keaner). However, Lenovo can use its cash cow – PCs – to successfully compete with them. Moreover, according with the company’s strategy it is also aware of smartphones market trends and is developing new opportunities for meeting the customers’ demands. Thus, there is a low rivalry for Lenovo on the PCs market. However, in order to successfully compete on the new smartphones market, Lenovo need to concentrate on its “blue ocean” strategy described in the second part of the paper.

How It Works

Analyzing and evaluating implications of the internal environment

In order to identify Lenovo’s strategic assets and distinctive capabilities, the V-R-I-O-S framework developed by Pitt and Koufopoulos (Chapter 5) will be used. This framework uses five criteria that should be rated: value-creating potential (V), rarity (R), imitability (I), organizational appropriability (O), and substitutability (S). According to Pitt and Koufopoulos (2012: Chapter 5), the following rating scale can be used: A – outstanding generator of value and advantage: B – a valuable, but not crucial source of advantage; C – useful, but probably of declining significance; D – already declining in significance and unlikely to be sustainable. Table 1 presents the V-R-I-O-S analysis of the Lenovo strategic assets and distinctive capabilities.

	V	R	I	O	S	Comments
Skills:
· senior management	A	B	A	B	A	Company’s leaders that have been dedicated to it for many years are core individuals in the organization who bring distinct value to it. Thus, they have high value-creating potential because of their experience, knowledge and loyalty to the company.
· specialists	A	B	B	B	A	Company’s talents are an important strategic asset for generating value. They are not crucial in terms of rarity, imitability and organizational appropriability. However, more than 3,200 engineers, researchers and scientists employed by Lenovo create an outstanding value for its products and services (Lenovo Group Limited 2013)
Competencies and capabilities:
· R&D work-groups	A	B	A	A	A	These groups generate outstanding value by almost all criteria. For example, Lenovo’s R&D teams have developed more than 6,500 globally recognized patents and have been awarded more than 100 major design prizes (Lenovo Group Limited 2013).
· functional units	A	B	B	B	B	The recent company’s reorganization into three business groups, focused on PCs, mobile technologies, and cloud services is highly valuable for the company in terms of revenue growth and business effectiveness.
· intellectual property	A	A	A	A	A	Intellectual property is an outstanding valuable strategic resource, because breakthrough technology cannot be purchased in the market and the company needs to develop it on its own (Mourdoukoutas 2015)
· manufacturing capability	A	B	B	B	B	Manufacturing capabilities are a valuable, but not crucial source of advantage in case of Lenovo. Its manufacturing facilities are located in China, India and Mexico, and in case of any market issues the company will be able to reorganize them.
Other strategic assets:
· goodwill	A	A	A	B	A	Nowadays Lenovo is a globally recognized company. For example, its Window Yoga Tablet with AnyPen Technology was included in PC Magazine’s “The Best of CES 2015” list (Mourdoukoutas 2015). Thus, the company’s brand is especially important for generating profits on the technical market.
· corporate culture	B	B	B	B	B	A corporate culture called “Lenovo Way” that has been developing during the years of the company’s history has helped to consistently build strong financial performance and deliver breakthrough innovations and award-winning designs.
· partnerships	B	B	B	B	B	For many years, Lenovo has been developing strategic partnerships with various companies. One of the main factors that helped Lenovo develop its core competencies was aquisitions that it has applied to for subsequent mergers and joint ventures.  For instance, Lenovo created the number one PC company in Japan by forming a joint venture with NEC (Lenovo Group Limited 2013).  It has also developed the #1 PC company in Germany by acquiring Medion. A joint venture with EMC allowed Lenovo to develop the sector of providing servers and enterprise solution. Such ventures allowed Lenovo to enhance its overall business through effectively supplementing the organic growth of its services and products.

Table 1. The V-R-I-O-S analysis of the Lenovo strategic assets and distinctive capabilities

According to the table, intellectual property, goodwill, and R&D work-groups are the most valuable Lenovo’s strategic assets, since they have got a minimum of four A scales (table 1). The company’s workforce, including senior managers and specialists (engineers and researches), (table 2) got the second place in the rating. According to the results, Lenovo needs to continue developing its employees’ talents and creating conditions for cultivating their loyalty. Moreover, it is especially important for the company to develop its positive image (goodwill) and focus on developing its own innovations.

It should be mentioned, that there are several limitations to this analysis. The first limitation is the author’s subjective opinion, which may have a significant impact on the process of rating the strategic assets and distinctive capabilities. The second limitation is the absence of insider information, related to the internal company’s processes, which may impact the results.

Strategy recommendations and evaluation summary

Lenovo is a global leader in innovative technology solutions. In order to become more efficient, Lenovo has formulated its strategic intent and aims for customer-centricity. Thus, nowadays the company focuses on innovation and customer engagement and develops new solutions. The “Device + Cloud” model chosen by the company is based on a combination of innovative devices and cloud computing.

In order to become more efficient in its field Lenovo uses the so-called “Blue Ocean” strategy known as “PC+”. According to this strategy, the company continues to focus on its core business – PCs production, and also looks for new opportunities in the smartphone market and cloud technologies. Moreover, unlike its competitors, Lenovo works in the lower price segments, which provides it with higher profit potential and wider customer base than focusing on the premium segments would.

As a multinational global company, Lenovo constantly provides ESG sustainability innovations and organizational improvements. First of all, the company values its employees as the most important assets. Thereby, the company strives to create the best working conditions for them by constructing and maintaining a safe workplace for all employees, providing educational courses and career opportunities. Further, Lenovo acts as a philanthropic organization by committing to different social investment programs and initiatives all over the world. Moreover, the company is highly dedicated to the programs, which focus on the environmental protection. For instance, it improves product energy efficiency, strives to decrease the number of produced CO2 and uses recycled materials in its manufacturing process. Moreover, by building a strong customer relationship model , which is based on involving clients, and by producing a variety of innovative products and ensuring the high quality of customer service, Lenovo will build a very loyal customer base for its brand. Furthermore, Lenovo also uses its low cost manufacturing facilities in China and increases its brand availability on the Chinese market in order to generate more revenue, which will help the company to support development in markets all around the world.

The evaluation of the Lenovo’s strategic approach to innovation proves that the company is well prepared for creating new critical developments and responding to competitor’s innovation. After Lenovo combined technology with the high-tech industry, it received a positive feedback from the market in the form of increased revenues. Further, its multiple international acquisitions serve both as instruments for strengthening Lenovo’s operation volume and ensuring the constant innovation development process. Moreover, such acquisitions allow Lenovo to attract talent from different fields and countries. Nowadays, Lenovo has created a strong R&D team, which includes more than 5000 engineers, researchers, product developers, and designers (Lenovo Group Limited 2013). Thereby, Lenovo is able to respond to the existent competition in the field of computers, mobiles, and cloud technologies.

Recommendations

Undoubtedly, Lenovo has created a successful strategy, which allows the company to achieve a strong financial performance. However, there are many risks associated with market instability and changeable customers’ tastes. Thereby, Lenovo’s strategy requires several improvements, which will ensure a sustainable growth and will help the company hold leading positions in the market.

According to the Hamel and Prahalad’s model, Lenovo should pay attention to combining the following strategic components: foresight, strategic architecture, strategic intent, and core competencies. First of all, it is necessary to improve the company’s ability to develop efficient forecasts of market trends. In order to do this, Lenovo should develop new or improve the existing technology forecasting techniques. Moreover, it is necessary to attract new managers from similar companies that have shown a high level of strategic vision. Second, it is necessary to improve the design of strategic architecture by deploying new functionalities and acquiring new competences. Third, Lenovo’s strategic intent has to been formulated clearly in terms of direction, discovery, and destiny. Finally, Lenovo should rebuild its core competencies. For example, PC production could be left as the major revenue generator. However, the company should effectively use its young workforce in order to generate innovative ideas in the sphere of cloud computing and smartphone technologies. For instance, it could provide talent acquisition techniques, focused on recent graduates. Additionally, Lenovo also need to pay more attention to exploratory businesses and different start-ups, which could be managed in order to maximize valuation and return on investment.

Using the V-R-I-O-S analysis of the Lenovo strategic assets and distinctive capabilities the following recommendations could be made. First of all, the company should focus on developing its workforce as it is the most valuable asset it has. It is possible to use new motivation technologies, i.e. providing new performance management systems based on creating more democratic atmosphere among the employees and allowing them to conduct self-reviews and evaluate their performance by themselves. Furthermore, differentiated job designs may be used (i.e. job simplification, job rotation, job enlargement, and job enrichment). Additionally, Lenovo’s brand is also defined as one of its most valuable assets. Keeping this in mind, the company should also pay more attention at different sponsorship or philanthropy programs, which would increase the customers’ awareness of the company’s brand. Moreover, other PR-strategies, i.e. youth engagement in the company’s product development process, may not only increase the customer’s loyalty to the brand, but also create conditions for developing new innovative products. Therefore, acquisitions of innovative companies that focus on developing cloud technologies, investments in research and development, a corporate structure dedicated to the company’s goals, building a recognized brand, focusing on developing a highly professional workforce will enable Lenovo to stay ahead of market trends and deliver a comprehensive portfolio of products.

Consequently, Lenovo could ensure long-term sustainable development if it builds a strong and suitable strategy to guide its ideology. Lenovo should focus on differentiating its target audience and developing high-end laptops and computers for executives, as well as mid-spectrum machines for other people. Further, it is necessary to focus on finding the right balance between producing high-end devices and ensuring their low cost. By doing this, Lenovo may potentially minimize its marginal costs and win the price war with its competitors.