LENOVO: BUILDING A GLOBAL BRAND

(Midterm Exam)

MM 5003
MARKETING MANAGEMENT

Created by:
Muhammad Afif (29116476)

MASTER OF BUSINESS ADMINISTRATION

BANDUNG INSTITUTE OF TECHNOLOGY
BANDUNG
2017
Executive Summary

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1. External and Internal Analysis

1.1 Porters 5 Forces Analysis

- Threat of new entrants:

Threat of new entrants in the global PC industry is moderate due to a

range of several factors. Such as high capital requirement, constant need of
technology improvement to attract customer (product differentiation), moderate
customer switching cost (due to standardization of most of computer component, it
becomes easy for customer to change their laptop), high distribution channel access
(availability of direct-to-customer service), decreasing profitability due to high
competition.

With the growth of the computer industry, there are foreseeable potential
entrances in this market. However, the entry barrier is relatively high. Enterprises
generally seem to be satisfied with their current notebook providers, with little
incentive to look beyond their current suppliers. However, in technology markets, it
is generally considered a constant possibility for a new company to leapfrog the
competition with a new invention. As a result, existing companies are rigorous about
attracting new engineering talent and attempt to use complementing to make major
changes in IT providers unprofitable. This is a significant reason that Dell, HP and
Lenovo maintain their dominant positions.

- Intensity of rivalry

Due to the fact that there are few competitors in the market and the
industry is growing constantly, the global PC industry market is a highly
competitive market. Currently, there are three major players in the PC industry
market, Dell, HP and Lenovo which the top three market share spots in the computer
industry. The other factors which make the intensity of rivalry are considered to be
high: (1) High fixed cost (cost for setup of manufacturing units increased fixed cost
which makes difficult for existing players to exit), (2) Constant changes in product
and price makes intercategory competition stiffer, (3) Low switching cost increases
rivalry, (4) High exit barriers place a high cost on abandoning the product. The firm
must compete. High exit barriers cause a firm to remain in an industry, even when
the venture is not profitable.

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 - Threat of substitute products

Many alternative substitutes exist in the market, with the level of threat
considered to be high. The development of PC is greatly influenced by the
technological development and innovation. PC has to face the big threat from
substitutes with the development of technologies. So with the development of new
technologies, some products have had the functions of PC and can be the substitutes
for PC. The most probable substitute products are ultra light laptops and ultra mobile
PCs. Despite the heavy advertisement of these products in the media, enterprises
dont see them as useful to their organization. These products tend to be produced as
a fashion statement, which get more attention from younger customers. Moreover,
the smartphone also begins to have the functions of PC and it has the advantages of
smaller size and convenience for carrying compared with the PC.

- Bargaining power of supplier

Supplier power is considered to be moderate in the computer industry.

- Bargaining power of buyer

PC products of different makers are homogeneous to the customers in the

market. Price has been the most important tool for the PC makers to compete for the
consumers in global PC market. PC makers don't have bargaining power to negotiate
the price with the consumers. In fact, the drastic competition has leaded to the great
decline of PC price in the global market. Price has been the most important for PC
makers to attract the consumers in global. So the bargaining power of buyers in
the global PC industry is very high and the PC makers have to face the drastic
price competition.

Forces Level
New entrants Moderate
Rivalry High
Subtitute Moderate
Supplier
Buyer High
Summary of Porters 5 Forces Analysis for Global PC Industry

1.2 PESTLE Analysis

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 The PESTLE Analysis is a tool that is used to identify and analyze the key drivers of
change in the strategic or business environment. Specifically a PESTLE analysis is a useful
tool for understanding risks associated with the Hi-tech market growth or decline, and as such
the position, potential and direction, to help make decisions and to plan for future events.

Political

Political stability or instability can have a deep impact on the profitability of an

industry. Lenovo is not only operating in China but all over the world, therefore it has to keep
its business strategy in line with global and local politics. In the recent years the political
environment in China has remained normal which means no disruptions. Since WTO has
liberalized trade for international companies to take advantage of markets dispersed around
the world, China also had to open its borders and soften its laws for imports and arrival of
foreign brands. However, since China joined the World Trade Organization (WTO), the
export tariff has decreased. So these regulations try to encourage business like Lenovo to
develop for a global extend.

Political
Generic Factor Coping Strategy of Lenovo
WTO has liberalized trade for international companies to take
advantage of markets dispersed around the world
Regulation European estates government help and support all foreign
investing companies like Lenovo to establish their business in this
region
Political environment has remained normal which means no
Political Stability
disruptions

Economic

1.3 Internal Analysis

Nintendo is currently using these key internal resources to create competitive

advantage: (1) financial resources; (2) creativity/human resources; and (3) brand name.

- Financial resources

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 Financially, Nintendo is still a very solid company. This good financial
position does not only allow Nintendo to have access to cheaper credit terms, it also
allows the company to conduct new investment programs in R&D.

- Creativity/Human resources

Nintendo is well known within the industry for producing intuitive consoles
and games; and its skills in producing legendary game characters and story lines are
accepted by specialist analysts as being Nintendos main core competency. The
creativity, talent, motivational potential, and experience the indicated employees and
others can transmit to younger generation Nintendo employees.

- Brand name

Nintendos brand name is one of the most recognized and trusted brands
within the industry. Nintendos dedication to quality and detail is well known.
Loyalty to the brand is well established and documented within the industry.

1.4 SWOT Analysis of Nintendo

Internal
Strengths Weaknesses
Important heritage in video games Behind in offering online experience
Strong global brand in video game Dependency on suppliers
market Does not appeal to serious gamers,
Innovative (first motion sensing) because not known for sophisticated
Good at simple friendly family games graphics
First console to approach casual gamers
External
Opportunities Threats
Leading game console brand image Shift in consumer preferences
Increasing demand for online gaming Competition between Sony and
Innovation in video game technology Microsoft
Subtitute product (PC and smartphone)

2. Market Segmentation, Targeting, and Positioning (STP)

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2.1 Market Segmentation
Unisex games (both male and female)
All age (from young to elder)
Middle to upper class income
Gamers and non-gamers in worldwide

2.2 Targeting

Below are shown the target market of Nintendo, especially for the Wii:

Wii games targeting those wanting fun in quick manner, easy to pick up and learn, and
not require serious time investment
Wii was specifically designed to expand the market. Nintendo wanted to go for a
previously underserved target population, and that meant making their games
appealing to the first-time user
Nintendo specifically targeted active, social people, looking to do things with
friends/family. Much less emphasis on deep single-player game play / intense 3D
graphics.

2.3 Positioning

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 From the picture, the positioning of Nintendo is for social and active
entertainment that easy to use and brings the whole family together and supports
movement and exercise. Ways that Nintendo positioned themselves to target their
previously-selected target market segments: (1) Wii would like to play Campaign:
Showcased families, children, women gaming together, (2) Nintendo ensured a selection
of simple, time-uninventive, social games (each Wii comes with Wii Sports pick up and
play), (3) Low initial financial investment required, because the Wii has lower price than
its rival such as Sonys PS3 and Microsofts Xbox 360.

With this vision, Nintendo has been trying to position its console as a
comparatively inexpensive device, easy to use and aimed at the whole family. It has been
increasingly creating games without regard to age, gender or gaming experience, and it
also has greatly expanded the exergaming experience, which is the combination of on-
screen playing with physical activities.

3. Value Proposition and Marketing Mix Analysis

3.1 Value Proposition of Nintendo

Product Customer
Experience Wants
Benefits

Features

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 Value Proposition Canvas

Nintendos Product Customer Wants

Unique motion controlled games Interactive and fun
Track body movement Easy to use, simple and quick
Intuitive console Inexpensive device
Budget-friendly games All age and gender

Nintendo provide the interactive experience through their unique motion controlled
games, track body movement to satisfy their customer. Nintendo believed that people wanted
to have fun and relax in an intuitive and inexpensive way. Thus, Nintendo spends more in
games characters creation skills rather than on pure technological performance.

With this vision, Nintendo has been trying to position its console as a comparatively
inexpensive device, easy to use and aimed at the whole family. It has been increasingly
creating games without regard to age, gender or gaming experience, and it also has greatly
expanded the exergaming experience, which is the combination of on-screen playing with
physical activities.

So, Nintendos value propositions are (1) unique gaming experience, (2) innovative,
inexpensive, and intuitive console hardware and software, (3) family and community
fun and enjoyment, (4) get fit while having fun, (5) family values, (6) extensive customer
base.

3.2 Marketing Mix Analysis (4P) of Nintendo

In this section, well analyze the strategy of Nintendo through marketing mix analysis
(4P): Product, Price, Place, and Promotion.

Product
1. The new product is developed in a way
that it supports many different segments
in almost all age
2. Nintendo has already established a good
Place
1. Available in 32 countries under Nintendo
Co. Ltd (Japan, Hongkong, Korea,
Taiwan), Nintendo of America (America,
Canada), Nintendo of Europe (France,

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 branding structure and a well established Benelux, Iberica, Germany, Italy, UK,
image positioning RU), and Nintendo of Australia.
2. Online and offline stores or distributors
Price Promotion
1. Nintendo wii game console products 1. TV and Web TV
2. Official Website and social media
have the most inexpensive price
3. Participate in some trade fair for
compared with the PS and Xbox
computers & video games (i.e. E3:
2. Wii have been sold to consumers for
Electronic Entertainment Expo), before
$200 at stores
launch a product

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REFERENCES

Farhoomand, Ali. 2012. Nintendo: Disruptor Being Disrupted. The University of Hong Kong,
Asia Case Research Centre.
Gualano, Cosimo. 2010. Nintedos Disruptive Strategy: Implications for the Video Game
Industry. University of Wales, Robert Kennedy College.
Joshi, Havovi and Samuel Tsang. Nintedos Disruptive Strategy: Implications for the Video
Game Industry. The University of Hong Kong, Asia Case Research Centre.
R. K, Claudio de Almeida. 2014. Nintendos Pursuit for Probability: A Pedagogical Case
Study. Lisbon: ISCTE Business School.
[Online] Ben Gilbert. 2016. A Complete History of Nintendo Consoles, By The Numbers.
http://www.businessinsider.co.id/nintendo-game-consoles-sales-photos-2016-
11/?r=US&IR=T#RwUrh6Pz9gQbZreO.97 (diakses 25 Februari 2017).

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