Lenovo Is Stuck in the PC Dilemma, Developing Towards Personalized Devices and Personalized Cloud, a

After the summer promotion in June, Lenovo engineers were very busy. A Lenovo engineer told the Beijing news that he had to work overtime until more than 9 p.m. every day. The reason is that in addition to solving the problems encountered by users using the product, they also provide "chicken eating" accompany Services for the reserved game notebook users. "Eat chicken" is a popular competitive gunfight game in recent years. This kind of game has high requirements for the performance of the PC in the hands of players. The game notebook is regarded as a rare product line that can drive the sales of PC products.

In the opening battle of Jingdong 6.18 Shopping Festival recently, although Lenovo won the first place in notebook sales, the top of game book sales was taken away by its old rival HP. Lenovo seems to lag behind its old rivals in the competition for new users of game notebooks.

Data show that in the first quarter of 2018, HP's shipments increased by 4.3% year-on-year, about 568000 units, and Lenovo only increased by 5000 units. According to the report of IDC, a third-party organization, HP, Lenovo's competitor, has led the global shipments for five consecutive quarters, and the leading range of Lenovo to the second place has expanded for three consecutive quarters.

At Lenovo's global pledge conference in April, Yang Yuanqing, chairman and CEO of Lenovo Group, announced that Lenovo's PC business would return to the first place in the next year. As the most important cash cow business of Lenovo Group, Lenovo PC urgently needs a victory to prove itself.

Market share: Lenovo is getting farther and farther away from HP

Lenovo has become the world's PC leader for 12 consecutive quarters. These 12 quarters are also a glorious moment for Lenovo, which has been reported by the media. However, HP has been biting Lenovo, and the difference between the two has always remained around 1 percentage point. IDC report shows that when the market share gap between the two companies is the least, it is only 0.1 percentage point, that is, less than 70000 units in the world.

In the first quarter of 2017, with the complete product line and the strong growth of notebook products in all regional markets, HP completed the anti surpassing, leading Lenovo by 1.3 percentage points. For such a gap, many industry insiders interviewed said that as long as one of them reduces the price promotion, it can surpass. At that time, Lenovo did not show panic. Its officials still stressed that "Lenovo's PC business is very healthy", and chairman and CEO Yang Yuanqing also said that "they do not care about the gains and losses of a moment or a matter".

Since then, HP has been ahead of Lenovo for four quarters, and the leading range has been expanding. By the first quarter of 2018, HP had led Lenovo by 2.2 percentage points.

Compared with HP, Lenovo still chooses multi line business parallel. Despite the best business and report in the past three years, Lenovo's transformation has not improved much in terms of business revenue and structure, and its advantages and challenges have not changed substantially.

In May 2018, Lenovo released its annual report for the last fiscal year, which showed that under the influence of the new US tax law, it accrued a one-time fee of US $400 million, which also led to a loss of US $189 million for the whole year. The profit of PC business fell due to the impact of rising upstream costs.

Liu Xueyan, an analyst at IHS, a third-party consulting firm, said that the PC market is already a very mature market. Only by paying profits can brands make high shipments. Lenovo's current consideration is very practical. The first thing is to increase the unit price and stabilize sales, so as to improve the profit level.

A staff member of Lenovo who participated in strategic research told reporters that "HP won the whole war". The strong commercial market provided a strong backing for the low-end market impulse of consumer grade, while Lenovo strategy gave up some sales with low gross profit.

As one of the commanders to win the war, Kevin frost, vice president of HP and global general manager of the consumer computer business unit, said, "we have found the demand and market growth point of mainstream consumers, and continue to pay attention to and invest in the future". The company split two years ago made HP's market strategy more flexible.

Acquisition cannot solve Lenovo PC dilemma

Lenovo has not fought a price war with HP for two years. From the perspective of product line, Lenovo and HP have basically covered all price segments ranging from 2000 yuan to 30000 yuan. Therefore, the performance of regional market has become the key to the victory or defeat of the two companies.

The most common way for Lenovo to expand the market is acquisition. In 2004, Lenovo, with a turnover of only US $3 billion, acquired the IBM PC department with a turnover of US $13 billion for us $1.25 billion, so as to open the global market. This big play of "snake swallowing elephant" is still regarded as a classic course case by global business schools. Since then, Lenovo has integrated NEC PC and Brazilian enterprise digibras.

In November 2017, Lenovo and Fujitsu established a joint venture to hold Fujitsu's PC business. Liu Xueyan said that Fujitsu's scale is not large, and Lenovo's acquisition is for the market. Another insider told reporters that Liu Jun, executive vice president of Lenovo, needs to prove that he can bring Lenovo's PC business back to the market first, and the cooperation with Fujitsu is an important step.

However, Lenovo's business integration is not smooth. Previously, the acquisition of ThinkPad had faced problems such as cultural conflict and executive resignation, which led Lenovo to bear huge financial pressure in the next five years, and even suffered a loss of nearly US $100 million in early 2009. At the same time, although Lenovo has partially fed its own business by acquiring assets, the brand still operates independently.

A staff member working in Lenovo's PC business told reporters that multiple product lines were parallel and did not get through in the real sense. In order to cope with the competition of new entrants such as Xiaomi, Lenovo has created Xiaoxin series from the design of its existing product line, but this has not changed the company's overall operation strategy.

In fact, it is difficult in the PC industry to rely on the acquisition of short-term replenishment ammunition. In 2001, HP completed the acquisition of its competitor Compaq with us $25 billion. However, after the merger of assets, HP did not get the expected market share. In the next two years, HP only managed to maintain compaq's original share.

Many middle and senior executives of HP interviewed said that the rapid growth of business benefited from the spin off of the company at the overall level. In their view, if businesses that need to face different customers are put together, the time for the company to allocate resources will become lengthy, and the management cost will rise. The industry believes that after HP's business split, it will respond faster before opportunities such as game notebooks.

Some analysts said that the company at a disadvantage in the competition must have its operation and management problems. If these problems are not solved, the problems will double after the merger, and will be more at a disadvantage in the competition, thus further losing market share.

Lenovo needs faster product line Countermeasures

Giving up sales to improve profits was once the strategy chosen by Lenovo PC. However, at present, Lenovo, which is in the background of being looked down on, needs PC to re ascend the throne of boss to boost morale.

In April 2018, Yang Yuanqing announced at Lenovo's global oath conference that Lenovo's PC business would return to the first place in the next year. The contradiction behind it is that Lenovo has passed the market stage of "small profit but quick turnover". At present, it needs PC to maintain strong profits and continue to supply blood for other businesses.

In terms of market performance, Lenovo's shipments in major regional markets all over the world fell year-on-year. Mikako Kitagawa, chief analyst of Gartner, a third-party consulting firm, said that the quarterly results reflected Lenovo's strategic shift from ensuring market share growth to ensuring profit margin.

As time goes on, HP's PC business shipments have shown an increasing trend for eight consecutive quarters. Zhuang Zhengsong, President of HP China, said, "you can think of yourself as a comprehensive service provider, but you can also think of yourself as a weapon supplier". The latter obviously needs a faster market response.

At the end of May 2018, HP held a marketing campaign for its new generation of game notebooks that invited many players and players of game E-sports events. Kevin Frost said that it was unthinkable for a company that used to serve enterprise customers.

Matched with this is the rapid expansion of HP's product line, especially the fashionable design of ultra-thin notebooks and high-performance game notebooks. These investments have brought returns to HP. In the latest quarter, net revenue increased by 12% year-on-year and net profit increased by 89% year-on-year.

Lenovo also chose to launch products with different configurations and prices in different regions, but failed to meet the real needs of the market. The above is what Lenovo staff in China said. Lenovo once released a high-end notebook of nearly 20000 yuan in the Chinese market, but the sales volume was flat.

The staff member said that due to the limitation of upstream procurement capacity, Lenovo's configuration often lags behind HP for three months, which has affected the sales of the market, and customer service can only constantly appease consumers. Even if the products with the same configuration are launched, because HP adopts a better screen, even if the final price exceeds Lenovo 500 yuan, consumers still choose to abandon Lenovo and turn to HP.

Can "cloud AI" solve Lenovo's PC dilemma?

In 2017, Lenovo announced its entry into the field of artificial intelligence with a high profile when the main business of PC declined. Yang Yuanqing said at the innovation and technology conference that Lenovo would empower industries and industries through "equipment cloud" and "infrastructure cloud", and announced the establishment of AI innovation centers in Beijing, China, Morrisville, the United States and Stuttgart, Germany.

Yang Yuanqing even said that he wanted Lenovo to become the world's three major data centers. Lenovo announced at that time that it had 9 data centers and more than 2000 servers worldwide. Globally, Amazon AWS, a cloud computing service provider, had 3 million units at that time, while Microsoft had 2 million units. Even Tencent and Alibaba cloud had more than 500000 servers.

For Lenovo, these ideas undoubtedly need a huge amount of financial support. The financial report shows that its R & D expenses have decreased by 8.7% and 6.5% year-on-year respectively since 2016. In fiscal 2017 / 2018, its R & D and capital expenditure decreased by 10.2% year-on-year, while Amazon increased by 45%, Google increased by 23%, Microsoft increased by 6% and apple increased by 5% year-on-year.

From the perspective of the overall development of the industry, this is a long marathon race. For no other reason, the decline in the PC market remains the same. The IDC report predicts that in 2018, this market will decline by 3.5% year-on-year, which is more severe than the 2.7% in 2017. At the same time, from the perspective of regional markets, there is no one take all market.

In other words, HP's strategy is only to make it lead in the short term.

In order to maintain its advantages, Kevin Frost said that HP plans to invest in cloud services, artificial intelligence, VR and 5g networks, which is the only way to continuously meet the needs of consumers. Among them, cloud services will help users switch between different screens, and voice interaction and 5g will bring users a new experience.

Lenovo has a similar plan. Yang Yuanqing once said that Lenovo has shifted its attention from personal computers to personal computing devices, and developed to personalized devices and personalized cloud. "We should compete with our competitors for a long time in this general direction.".

Lenovo Is Stuck in the PC Dilemma, Developing Towards Personalized Devices and Personalized Cloud, a 1

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