The $30bn dollar man

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Lenovo’s business is heavily dependent on in its expertise in marketing and selling desktop and laptop PCs to both consumers and businesses worldwide.

Lenovo’s business is heavily dependent on in its expertise in marketing and selling desktop and laptop PCs to both consumers and businesses worldwide.

Yuanqing says Lenovo’s strategy in mobile devices will see it follow its Chinese launches with those in emerging market nations such as Russia, Indonesia and India. The company will seek to introduce some of its smartphones to Saudi Arabia and the UAE in the next financial year, followed by a European launch. The company is also evaluating bringing its devices to the Levant.

Yuanqing refutes the suggestion that Lenovo has been slow to capitalise on the emergence of the smartphone market. The company began researching the technology in 2006 before taking its first device to Chinese consumers in 2010.

Lenovo will not launch its ranges of smartphones in Western Europe until 2014. In contrast, Apple — widely acknowledged as one of the leaders in this space — began selling smartphones in 2007.

“When you prepare the product, you need to take some time. Secondly, you must choose the right market to enter,” he explains. “We thought that China is the appropriate market for us to break through first.”

Lenovo is not only highly leveraged in the PC business — which accounts for more than four-fifths of revenue — but also in its home country of China, where it derives almost half of its annual turnover. So steep is Lenovo’s penetration in this market, the firm claims, it is not uncommon to see donkeys delivering its computers in China’s most rural outposts.

Yuanqing says that when the company enters foreign shores, it does so with the intention of being number one. It may sound like grandstanding on his part, but given that the company operated at a razor-thin pre-tax profit margin of 2.6 percent in its last fiscal quarter, it seems gaining critical mass quickly is essential to Lenovo’s success in new markets.

“If you don’t have enough scale, if you don’t have enough volume, it’s hard to make money. If you don’t have enough market share, it’s hard to make money,” Yuanqing says. “That’s why we enter the markets one by one. When we enter a market, we want to quickly get double-digit market share.”

While Lenovo owns most of its own manufacturing capabilities, the vast majority of its products’ components are bought in from third party providers. Yuanqing asserts that Lenovo is not just a glorified computer assembly line and that it has invested massively in new form-factors such as Yoga, as well as software for its devices.

“This is not just putting components together. We have developed for many years on these kinds of products,” he argues. “We’re investing in software and application eco-systems.”

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